Fiat Group may need outside capital to take over Chrysler
Analyst says without IPO Fiat risks credit if tries on own28 October, 19:22
The Turin-based automaker could need financing for at least 1.9 billion dollars to buy the 41.5% Chrysler stake that belongs to the United Auto Workers VEBA retiree healthcare trust and avoid an initial public offering (IPO), the analyst said.
That scale of financing would put the Fiat Group at risk of a credit rating downgrade, the analyst reasoned.
Moreover, the Fiat Group would then need an additional 4.3 billion dollars to have the resources necessary to complete company restructuring in Europe.
Church thought Exor, the Agnelli family holding group that owns 30% of the Fiat Group and has 7.7 billion euros of assets, might be a candidate to provide the capital necessary.
The IPO by Chrysler could put at risk longstanding plans to merge the Michigan-based automaker with Italy's standard-bearer Fiat, Fiat Group chairman John Elkann warned in late September.
"If the IPO proceeds, there will be two companies," said Elkann.
"Having two companies is very different from having just one," Elkann added.
Earlier in September 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.
But Fiat also said that the regulatory filing for the IPO was no guarantee that the sale of Chrysler shares would proceed, as so far it has not.
Analysts suggested that Sergio Marchionne, chief executive officer of both Chrysler and Fiat, hoped the move would 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 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.