Chrysler and Fiat ‘one company,’ under Marchionne
Fiat and Chrysler CEO Sergio Marchionne would like to buy out Chrysler and merge the automakers. (Photo Credit: CC BY/SOCIALisBETTER/Flickr)
A house divided against itself cannot stand. Perhaps this is why Chrysler and Fiat CEO Sergio Marchionne said today to the automotive press that his ultimate long-term business goal is for his Italian automaker Fiat to buy out the remaining shares of Chrysler so that he can merge the two companies into one automaker. If not one company to rule them all, one company that can change the global automotive industry.
Chrysler and Fiat already run as ‘one car company’
At a Chrysler engine plant in Detroit, Mich., Marchionne noted without equivocation that he is “running one car company,” reports the Detroit Free Press.
“We are here to try and build value,” he said.
At this time, Fiat controls 58.5 percent of Chrysler. The rest of the stock – 41.5 percent – is controlled by UAW Retirees Medical Benefits Trust, a voluntary employee beneficiary association trust fund.
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Fiat, UAW trust disagree on value of Chrysler shares
Fiat is currently attempting to buy 3.3 percent of the Chrysler shares carried by the trust, but a lawsuit is pending with respect to the value of the shares in question. Fiat has offered to pay $139.7 million, but the trust places the value of the Chrysler shares at around $381 million, according to a Chancery court filing in the state of Delaware.
UAW Retirees Medical Benefits Trust has the legal right to initiate an IPO as early as January 2013, and Marchionne is reportedly looking forward to the day. He has gone on record as saying that he is willing to buy up Chrysler’s shares on the open market, and that he will cooperate with the trust during this period of changeover.
Fiat having trouble in Europe
Sales records indicate that Fiat needs a huge boost in Europe. Five consecutive years of declining sales have caused Fiat to lose money hand over fist. Analysts suggest that by acquiring all of Chrysler, Fiat will then be able to access Chrysler’s cash reserves in order to fund a full restructuring of European operations.
However, according to Marchionne, restrictions in the lending agreements between the separate automakers prevent Chrysler from funding the operation of Fiat.
“We are very, very respectful of minority interests in the U.S. and there are firewalls for cash flow,” Marchionne said. “When we borrowed The $7 billion last year, we borrowed it with the very clear understanding that we would segregate cash and cash flow.”
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