Fiat chairman says Chrysler IPO threatens merger
'If it proceeds, there will be two companies' warns Elkann26 September, 16:19
"There is a path that has been defined," said Elkann on the sidelines of a conference in Milan.
"If the IPO proceeds, there will be two companies, and there is no doubt" that in such a case, the situation would change with Fiat and Chrysler, said Elkann.
"Having two companies is very different from having just one".
Earlier this week Chrysler, which is majority owned by Turin-based Fiat, shocked many by launching an IPO on financial markets in the United States in an apparent bid to end a deadlock in negotiations over its future. Indeed, Fiat said Tuesday that the regulatory filing for the IPO was no guarantee that the sale of Chrysler shares would proceed.
Analysts suggested that Sergio Marchionne, chief executive officer of both Chrysler and Fiat, is hoping this move will prod his reluctant union partner in Chrysler to sell him its minority stake and end the manoeuvring.
Long-running negotiations have broken down between the automaker and a union fund that holds 41.5% of Chrysler shares not already owned by Fiat.
VEBA, the United Auto Workers retiree health-care trust, has reportedly demanded $1 billion more for its shares than Marchionne wants to pay, despite his desire to control that stake in order to complete a merger of Fiat with Chrysler.
But Marchionne, whose Fiat now holds 58.5% of Chrysler shares, has balked at that price tag - reportedly, VEBA has asked for about $4.25 billion for the shares - and is gambling that outside investors will agree with him.
VEBA received its stake in Chrysler as part of the Fiat-Chrysler merger deal in 2009, which rescued the ailing American automaker from bankruptcy.
But since then, Chrysler has found its footing and become more financially stable than Fiat and even a money-maker for both.
Fiat has been heavily reliant on Chrysler and its financial assets to keep Fiat afloat in a home market crippled by recession and the fallout from the European debt crisis.
At the same time, Marchionne has been working to merge the two automakers into a global automobile giant on the same scale as such brands as Toyota or General Motors.
Marchionne, who signalled his importance in Italian affairs by dining with Italian Premier Enrico Letta Wednesday in New York, has previously acknowledged that an IPO could present a setback in his plans to proceed with a full merger of the two automakers.
Letta has been holding meetings with other heads of state at the United Nations in New York.