Fiat buys rest of Chrysler from UAW; no IPO $4.35 BILLION

Fiat buys rest of Chrysler from UAW; no IPO

James R. Healey, USATODAY7:23 p.m. EST January 1, 2014

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(Photo: Dodge)

STORY HIGHLIGHTS

• Fiat-UAW settle price on union's Chrysler stake, avoiding IPO
• Fiat North America is paying the union's retirement trust $4.35 billion for the remaining 41.46% of Chrysler
• Fiat/Chrysler CEO Marchionne now can merge Chrysler, Fiat

Fiat, owner of Chrysler Group, has agreed to buy the United Auto Workers' remaining 41.46% stake in Chrysler for $3.65 billion, plus four separate payments totaling $700 million.

The agreement, announced Wednesday, heads off a public stock offering of Chrysler shares that Fiat and Chrysler didn't want, but the UAW was forcing, in order to set a value on its stake.

It puts to an end months of cantankerous wrangling between the union and automakers about the value of the retirement trust's shares. And it's happened suddenly, in an unexpected way, as firm plans had been announced late last year for the IPO.

Fiat previously bought out the stake held by Canadian governments, so once the current deal closes, Fiat and Chrysler can be merged into a single company. No details have been hinted about where a merged automaker would have headquarters, nor whether a full merger would change product plans or management teams.

In a statement, Fiat/Chrysler CEO Sergio Marchionne said, "The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how, a solid and open organization that will ensure all employees a challenging and rewarding environment."

UAW's employee retirement trust — VEBA — owns the stake, and it and the automakers have been unable to agree on a price. The matter went to court, but the judge declined to set a price. As part of the buyout agreement, the retirement trust won't pursue any further legal action.

Marchionne wants to own all of Chrysler so he can tap its cash to help support ailing Fiat, and to streamline operations of a merged company.

Fiat got control of Chrysler during the Detroit maker's 2009 Chapter 11 bankruptcy reorganization, seen as a savior of Chrysler that would provide the Detroit maker with much-needed economy cars. But European markets since then have tumbled, and Euro brands have been hard pressed to maintain profits.

Chrysler, meanwhile, has reported solid earnings — $1.14 billion for the first three quarters of 2013, and nine consecutive profitable quarters. Fourth-quarter earnings will be reported later.

The purchase will be made by Fiat's Fiat North America unit. The transaction is expected to close on or before Jan. 20.

It will be structured this way:
• Chrysler and Fiat North America will pay VEBA members $1.9 billion in a special distribution.
• Fiat will pay the VEBA another $1.75 billion cash.
• Chrysler will make four payments of $175 million to the VEBA in the next year.
• The UAW agrees to a memorandum of understanding under Chrysler Group's existing collective bargaining agreements that the union will make "certain commitments to continue to support the industrial operations at Chrysler Group and the further implementation of the Fiat-Chrysler alliance, including to use best efforts to cooperate in the continued roll-out of Fiat-Chrysler World Class Manufacturing programs, actively participate in bench-marking efforts associated with implementation of these programs across all of Fiat-Chrysler manufacturing sites to ensure objective performance assessments and provide for proper application of WCM principles and actively assist in the achievement of the Group's long-term business plan."

http://www.usatoday.com/story/money/...e-ipo/4279411/