Chrysler files for initial public offering
Only asset company can offer after bankruptcy is own stock
The Chrysler Group has filed for an initial public offering this week. This may mean that the automaker will return shortly to the public market. The shares to be sold in the proposed offering come from the trust established to cover medical benefits for retired workers that now owns 41.5 percent of the company.
Similar trusts were set up at General Motors and Ford as the U.S. auto industry reeled during the economic downturn. GM says that it plans to repurchase 120 million preferred shares from its trust.
What has not yet been determined in the shares in the Chrysler offering. The company's registration document with the Securities and Exchange Commission indicated that the trust would continue to hold a stake after its sale of shares to the public. The offering is being led by JP Morgan.
Italian automaker Fiat rescued Chrysler from bankruptcy in 2009 and now owns 58.5 percent of the the company. The company was previously purchased in 1998 by Germany's Daimler-Benz.
Fiat CEO Sergio Marchionne has made clear that he wants Fiat to own all of Chrysler and to merge the two companies. The preparations for an IPO suggest he has been unable to reach a deal with the trust to buy its shares directly, rather than sell them to the public.
The process ahead could help the trust and Fiat agree on a fair market value for the company. Kelly Blue Book senior analyst Alec Gutierrez said the filing "may only serve as a negotiating tactic."
Marchionne has been the CEO of both auto makers since Chrysler emerged from bankruptcy, with the two companies almost operating as one. Chrysler, which also produces Jeep and Dodge vehicles, has begun to sell Fiat cars in the U.S. for the first time in decades.
Fiat bought the eight percent of the shares in the company that were initially owned by the U.S. Treasury as a result of Chrysler's government bailout. It gained additional shares through the transfer of Fiat technology to Chrysler.
Mounting a strong comeback in recent years, Chrysler reported a double-digit sales increase in August versus 2012. "Chrysler has come a long way since bankruptcy and the IPO is further proof as their sales continue to soar to new heights," Gutierrez says.
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