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Marchionne Says Chrysler IPO Could be Delayed

Wednesday, 30 March 2011 02:30 PM

Fiat and Chrysler CEO Sergio Marchionne suggested Wednesday that Chrysler may delay its initial public offering depending on the cash needs of the U.S. automaker and the auto workers union trust fund.

Marchionne has previously hinted that an IPO could happen by the end of the year.

He said a decision on whether and when to take Chrysler public would depend on how much the automaker itself and the United Auto Workers health care trust, which pays health benefits for retirees and holds a 63.5 percent share in Chrysler, need liquidity.

"If those two needs are not there, then the IPO of Chrysler may or may not become relevant," Marchionne told reporters after a Fiat shareholders meeting.

But he added: "It is rational, maybe reasonable, to expect that there will be an IPO. It can't be done very quickly. We just filed with the SEC, we're still working our way through the comments. We have to get ready to be a public company again, and issuing securities takes time. We should do it properly."

Fiat SpA, which took over management of Chrysler LCC 21 months ago, increased its stake in the once-bankrupt automaker, Detroit's third largest, to 25 percent this year. Marchionne confirmed that it expects to raise it to 35 percent by the end of the year. At that point, it could go even further and raise its stake to majority 51-percent stake if Chrysler repays loans to the U.S. and Canadian governments. Marchionne is talking to banks about refinancing.

"Our goal remains to achieve a stake of more than 51 percent within the year," Marchionne said. At that point, Chrysler could launch an IPO.

Marchionne said Fiat had other options for further increasing its stake beyond 51 percent — including the possibility to acquire 8 percent of the U.S. Treasury's stake Chrysler, he said. The Canadian government owns another 2.3 percent.

Marchionne told shareholders earlier that the two automakers potentially could generate combined revenues of 100 billion euros ($141 billion) by 2014.

Marchionne expects Fiat's revenues alone to nearly double from 35.8 billion euros in 2010 to 64 billion euros, a target previously announced. That would leave the once-bankrupt Chrysler to contribute more than euro36 billion.

Fiat SpA, which got an initial 20 percent stake in return for small-car technology and management know-how, is in the process of relaunching Chrysler with a series of new model launches, including the Fiat-badged remake of the iconic 500 city car.

"I am very happy with the progress the American company is making," Marchionne said. "It has taken great strides in the last four months."

Chrysler has targeted sales of 2 million cars in 2011. Marchionne was sticking by the target despite delays in production, including of the 300.

"We won't see a benefit until Q2. I am happy with that. I think the important thing is to continue to make money and generate cash."

Chrysler was forced into bankruptcy when auto sales tanked during the 2008 financial crisis, and still has not returned to profits. The United States' third automaker, however, has dramatically narrowed losses in 2010, and forecasts net income of $200 million to $500 million for 2011.

Marchionne told shareholders he expects to recoup market share in Europe with new model launches in the second half of the year — including Chrysler models that will be sold under the Lancia brand.

The carmaker sold 2.08 million cars and light commercial vehicles last year, down 3.2 percent, largely attributed to declining sales in Italy and Germany after the expiration of cash-for-clunker scrapping incentives.

The European car market is expected to be tough again in 2011, influenced by forecast declines in France and Italy, he said.

"Nevertheless, we project our market share will increase as a result of the new model releases programmed for the second half," Marchionne said.

He spoke at the last shareholders meeting of the combined Fiat Group, including both Fiat's automobile and industrial businesses. Fiat this year split off its farm equipment and truck business from automobiles to allow the businesses with different scales and cycles to follow their own logic, and perhaps make new industrial alliances.

Separating the Fiat car business from industrial also would make a potential merger with Chrysler easier to achieve. Analysts expect the companies to merge eventually, although Marchionne has said that would not change day-to-day operations.

The prospect of a merger has raised political concerns in Italy that Fiat, the nation's largest industrial concern and employer, would move its legal headquarters to the United States.

Marchionne repeated again that no decisions have been made. Fiat has previously said that Turin has a secure role as the center of Fiat and Chrysler's European operations.

"In any case, it wouldn't change anything for the workers," said Chairman John Elkann, whose family is the largest stakeholder in the company long run by his grandfather Gianni Agnelli.

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Fiat and Chrysler CEO Sergio Marchionne suggested Wednesday that Chrysler may delay its initial public offering depending on the cash needs of the U.S. automaker and the auto workers union trust fund.Marchionne has previously hinted that an IPO could happen by the end of...
Wednesday, 30 March 2011 02:30 PM
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