Chrysler Enters Game of Chicken with UAW Trust Over IPO

Chrysler Group LLC is getting ready for an IPO. The CEO of Fiat is trying to reach a private buyout agreement with Chrysler’s sole minority shareholder, UAW Trust or be prepared to take Chrysler public. The trust wants an IPO to set a price on its 41% stake in Chrysler. Mr. Marchionne is trying to avoid an IPO but he cannot ignore the demand of the Trust to seek to an IPO.

Mr. Marchionne and the UAW Retiree Medical Benefits Trust have been trying to decide on the value of Chrysler shares for over a year now. The trust thinks that the shares are worth $4.27 billion while Fiat argues that the shares are worth $1.75 billion according to their specific calculations. Both sides agree that an IPO is very risky and that the underwriting fees will be costly for both parties. The trust wants to get as much money as possible for the shares to make sure it can cover the medical costs for the thousands of Chrysler retirees. And Mr. Marchionne’s intention is to eventually combine Fiat and Chrysler.

Negotiations on the trust’s behalf will be done by Brock Capital Group LLC and Chrysler has chosen JP Morgan to lead Chrysler has chosen JP Morgan Chase to lead the IPO if FIAT and the union fail to reach a deal on the price to sell.

By Ruchi Shah

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