Chrysler IPO Filing Forces Fiat To Rethink Alliance

Fiat's quest to buy out Chrysler could be delayed as the US carmaker succumbed to pressure from its second-largest shareholder and filed for an initial public offering.

Fiat wants to buy a 41.5% of Chrysler to cut borrowing costs and access some of the company's cashflow.

However, the United Auto Workers Trust Fund, which holds the 41.5%, pushed Chrysler to sell shares to the public after negotiations to sell them to Fiat failed. The UAW demanded more than $5bn (£3.1bn, €3.7bn) for its shares.

The IPO will be underwritten by JPMorgan. Analysts said Chrysler could attract a valuation of around $10bn, reported Reuters.

Analysts viewed UAW's move as a negotiating tactic aimed at extracting money from Fiat.

Fiat responded angrily at the filing and could exit the alliance.

"Fiat has informed us that it is reconsidering the benefits and costs of further expanding its relationship with us and the terms on which Fiat would continue the sharing of technology, vehicle architectures and platforms, distribution networks, production facilities and engineering and management resources," Chrysler said in its filing with the US Securities and Exchange Commission.

"Fiat is saying that Chrysler is worth less if we don't get that full integration," says Richard Hilgert, an analyst with investment research firm Morningstar.

"It's a shot across the bow of the UAW."

UAW's entire Chrysler portfolio amounts to 676,000 shares. The union became Chrysler's second-largest shareholder, when the automaker emerged from bankruptcy in 2009, after UAW traded future healthcare payments owed to it for a stake in the company.

Fiat acquired a 20% stake in Chrysler in 2009, in a deal brokered by the US government.

Since then, Sergio Marchionne, chief executive of both firms, has turned around a dying business, repaid Chrysler's government loans, and increased Fiat's stake in US automaker to 58.5%.

Italy Factory Revival

Earlier in the month, Fiat announced it would restart production at its oldest and largest factory in Turin, part of a plan to pull its European business out of loss by 2016.

While Fiat did not provide details, an unnamed union leader said it would invest about €1bn (£844m, $1.3bn) in the Mirafiori plant, where it would build a new Maserati sport-utility vehicle.

The decision underscored Fiat's commitment to continue producing cars in Italy.

Workers and politicians feared the carmaker, whose five Italian factories are under-utilised, would move production to Chrysler factories in the US.