Chrysler files papers for share sale

Jeep Grand Cherokee Chrysler has seen a dramatic turnaround since filing for bankruptcy in 2009

US carmaker Chrysler has filed papers for an initial public offering as its two biggest stakeholders continue to disagree on the terms of a merger.

Majority owner Fiat wants to acquire the 41.5% stake of Chrysler currently held by a healthcare trust but they have failed to agree on a valuation.

Chrysler did not say how many shares it plans to sell and at what price range.

But analysts said the sale may not happen as the two sides were likely to come to an agreement eventually.

"This is just the negotiating dance that they have to go through to come to an agreement," said Richard Hilgert, a Morningstar analyst who watches both Fiat and Chrysler.

Chrysler said that the proceeds from a sale would go to the United Auto Workers health care trust - which owns the 41.5% stake.

'Windfall'

Chrysler filed for bankruptcy in 2009 and had to be rescued by the US government.

The US Treasury originally provided $12.5bn (£7.4bn) in emergency loans to the troubled carmaker during the financial crisis and recession.

Start Quote

The trust is looking for a windfall based on the current expected value of a public-traded Chrysler, but the move may actually harm Chrysler's future and by extension harm current Chrysler workers”

End Quote Jack Nerad Kelly Blue Book

But as conditions improved it sold its stake to Fiat - giving the Italian carmaker a majority holding in Chrysler.

The US carmaker has seen a dramatic turnaround in its fortunes since then and has returned to profit. It has also become a key driver of earnings for Fiat.

In the April-to-June quarter this year, Fiat reported a profit of 142m euros (£123m, $188m), up from 32m euros a year ago. But without the contribution from Chrysler, Fiat would have lost 247m euros.

Fiat has expressed its desire to acquire the remaining stake in Chrysler to consolidate its operations and take on global giants such as Toyota, General Motors and Volkswagen.

However, in its filing with the US Securities and Exchange Commission, Chrysler admitted that a completion of a proposed share sale "will prevent or delay Fiat from meeting this objective".

"Fiat has stated that it believes a publicly-traded Chrysler Group will prevent or delay the full realization of the benefits of the Fiat-Chrysler Alliance.

"Fiat has informed us that it is reconsidering the benefits and costs of further expanding its relationship with us," it added.

Analysts warned that if relations between the two companies soured it may hurt Chrysler's ongoing recovery.

"The trust is looking for a windfall based on the current expected value of a public-traded Chrysler, but the move may actually harm Chrysler's future and by extension harm current Chrysler workers," said automotive analyst Jack Nerad of Kelly Blue Book.

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