Chrysler IPO Latest Installment in UAW and Fiat’s Fight for Detroit Automaker

New Chrysler logoFor the first time in 15 years, Chrysler could light up the stock market under its own name. On Monday, the Italian-controlled automaker filed an initial public offering with the Securities and Exchange Commission, four years after Fiat and American taxpayers rescued the company from bankruptcy. But the prospectus filing—incredibly undervalued at $100 million and full of blanks—could be another placeholder in the yearlong court battle between Fiat and the UAW’s Retiree Medical Benefits Trust, which holds a 41.5-percent stake in Chrysler. In short, here’s why:

The trust, also known as the Voluntary Employee Beneficiary Association (VEBA), was set up in 2007 to defray retiree insurance costs from the Big Three. During Chrysler’s 2009 bankruptcy, the trust agreed to wipe away the automaker’s $7-billion insurance liabilities for a majority company stake (more than 63 percent) and a promise to pay back $4.87 billion. Everything was going peachy. Fiat, having received 20 percent of Chrysler for free during the Treasury bailout, gradually ramped up its stake over the next three years, all while Chrysler sales boomed, more dealers reported profits, and new product (including actual Fiats) rolled onto showroom floors. When Chrysler repaid the U.S. Treasury $5.1 billion in May 2011 and the government sold its 6-percent stake weeks later, Fiat became the majority shareholder.

But like most long-distance relationships, Fiat and the VEBA wore each other out. In July 2012, Fiat tried to buy up VEBA shares under a stockholder agreement that could see it own up to 75 percent of Chrysler. The VEBA thought Fiat was lowballing it and demanded nearly two-and-a-half times the proposed amount. The two have been sparring in a Delaware court ever since, with neither side agreeing to what Chrysler’s shares are actually worth. So the VEBA, under its own stockholder agreement, is now forcing Fiat to buy its minority shares on the open market. (Coincidentally, or perhaps not, Chrysler’s IPO was filed on the same day General Motors said it would buy $3.2 billion in VEBA shares.)

This could leave Chrysler left hanging on a limb, sort of a monkey in the middle, as it were. When GM filed its IPO in 2010, investors paid $33 per share and then watched them sink below $25 for most of 2012. Only in May did GM’s price finally crest above its IPO. If investors are warier this time around, there’s a chance Fiat may not buy the VEBA shares—and worse, quit Chrysler altogether.

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About Clifford Atiyeh