Fiat CEO Sergio Marchionne.
While the rest of us were celebrating the new year, Chrysler was switching nationalities. By January 20, Fiat will buy the last 41.5-percent stake in Chrysler, currently held by a UAW healthcare trust, marking the first time a Detroit automaker has come under full foreign ownership.
Fiat announced Wednesday that it would pay the Voluntary Employee Beneficiary Association (VEBA), a healthcare fund set up in 2007 for Big Three retirees, a total of $4.35 billion to gain control of Chrysler. The sale ends a sometimes-bitter cat-and-mouse game between the two stakeholders, which have been sparring in a Delaware court since September 2012 over the value of certain VEBA shares. The argument went full tilt when the VEBA forced Chrysler to file an initial public offering, an intent to extract more money than Fiat—which by contract was buying 3.3-percent stakes in Chrysler every six months—was willing to pay the trust. Those incremental purchases were supposed to last through 2016, but the IPO filing put Fiat on the defensive—although he denied it, CEO Sergio Marchionne reportedly discouraged investors from the deal—while the two sides continued to negotiate.
The final $4.35-billion settlement is below the $4.87 billion the VEBA claimed it was owed after it took a majority stake in Chrysler during the automaker's 2009 bankruptcy. At that time, the VEBA wrote off $7 billion in insurance liabilities by taking more than 63 percent of Chrysler. By October 2013, the VEBA had valued its 41.5-percent stake at more than $5 billion. In Wednesday's announcement, Fiat said it would pay the VEBA $3.8 billion this month, with the remainder over the next three years. Both parties issued statements praising the deal and agreed to drop the lawsuit.
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While Fiat did not officially withdraw the IPO filing, it's unlikely Chrysler will go public now that it's a wholly-owned Fiat subsidiary like Ferrari, Maserati, and Alfa Romeo. No other changes to Chrysler's operations have been announced, but we're sure Marchionne has lots in store for 2014.
from Car and Driver Blog http://blog.caranddriver.com
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