Chrysler Group LLC’s initial public offering may be “relatively small” and in “chunks” so the U.S. automaker run by Fiat SpA can establish a base market for its stock, the company’s top executive said.
The automaker’s financial performance next year will support an IPO in the second half, Chrysler Chief Executive Officer Sergio Marchionne told reporters today at the Paris Motor Show. He is also CEO of Fiat.
Marchionne is almost one year into a five-year plan to rebuild the Auburn Hills, Michigan-based automaker after its bankruptcy last year. Fiat controls Chrysler with a 20 percent stake that can be increased by meeting certain milestones. The majority of the stock is held by a trust established to cover medical costs for union retirees.
“One of the options is to do an initial public offering that would involve a relatively small issue” then come back six to nine months later to do a wider distribution so the United Auto Workers’ trust can sell its shares, Marchionne said.
The UAW retiree trust holds 67.69 percent and the U.S. and Canadian governments hold a combined 12.31 percent.
“The primary objective of the IPO is to provide financial, long-term stability to Chrysler,” Marchionne said, so it may be more effective to sell stock in “chunks.”
General Motors Co. is seeking to raise $8 billion to $10 billion in an initial public offering in November, two people familiar with the situation said this month.
That’s a smaller target than the Detroit-based automaker earlier anticipated, because the U.S. Treasury, which owns 61 percent of GM, prefers a higher share price to a large offering, the people said.
Marchionne said Chrysler would seek to raise “by far” less than $8 billion.
He reiterated that Chrysler is ahead of plan with its financial performance for the year.
Chrysler’s U.S. vehicle sales rose 10.2 percent for the year through August compared to last year, according to Autodata Corp., the researcher based in Woodcliff Lake, New Jersey. The automaker may have led U.S. automakers with a 48 percent sales increase during September, according to the average of six analysts’ estimates surveyed by Bloomberg.
“We are in the process of finalizing the third quarter,” Marchionne said in an interview. “We are probably a big chunk of the year ahead compared to the plan we presented.”
Chrysler reported a first-half net loss of $369 million while posting operating profit of $326 million. The results exceeded the automaker’s guidance that operating results would be break-even to $200 million. Marchionne has signaled that profit and cash guidance will be upgraded after the third quarter. In August, he said the automaker would have a difficult time turning a net profit for the year.
Meanwhile, Fiat shares climbed to a two-year high in Milan trading after Marchionne said the Italian automaker will raise its financial targets and will report a profit for 2010. The company had forecast “near break-even” earnings in April.
Fiat jumped 35 cents, or 3.2 percent, to 11.32 euros at the 5:30 p.m. close of trading in Milan, the highest price since Aug. 18, 2008. The stock is up 10 percent this year, valuing the carmaker at 13.5 billion euros ($18.4 billion).
Third-quarter results were better than expected, said Marchionne, adding that he looked at Fiat’s most recent financial figures last night. Marchionne reiterated that he’s open to a possible partnership for the truck and tractor business that he is separating from Fiat and that he has no intention to sell the Alfa Romeo brand.
Volkswagen AG supervisory board Chairman Ferdinand Piech told reporters yesterday that he is still interested in acquiring Alfa Romeo.
Fiat is spinning off industrial operations including the Iveco truck maker and the CNH Global NV tractor division to focus on carmaking. The Turin, Italy-based company plans to list Fiat Industrial shares on the Milan exchange on Jan. 3.
Marchionne said September “was not a great month in Italy and Europe.” European auto sales fell for a fifth consecutive month in August, led by Fiat, Ford Motor Co. and Toyota Motor Corp. Fiat recorded the biggest decline among the major manufacturers, with sales falling 24 percent.
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