Marchionne Hopes for Joining Fiat, Chrysler

A house divided cannot stand. Perhaps this is why Chrysler and Fiat CEO Sergio Marchionne said today to the car press that his best long-term business objective is for his Italian car maker Fiat to buy out the leftover shares of Chrysler so that he can merge the two companies into one car maker. If not one company to rule them all, at least it can be one company that can change the worldwide automotive industry.

Not two companies right now

Marchionne explained that Chrysler and Fiat are already running as one car business, according to the Detroit Free Press.

"We are here to try and build value," he said.

At this time, Fiat controls 58.5 percent of Chrysler. The rest of the stock - 41.5 percent - is controlled by United Auto Workers Retirees Medical Benefits Trust, a voluntary employee beneficiary association trust fund.

UAW wants more money

Fiat has offered to pay $139.7 million for 3.3 percent of the Chrysler shares currently owned by the trust. The trust believes that value should be closer to $381 million, so a lawsuit is pending to stop the transaction.

Marchionne hopes that the UAW Retirees Medical Benefits Trust will do an IPO, which can take place as early as January 2013. He said he will cooperate with the trust during this time and will buy up Chrysler's shares on the open industry if he has to.

Fiat European sales

The basic idea of acquiring Chrysler might be just to use all its cash reserves to keep Fiat afloat during bad times, according to analysts. Fiat has had five consecutive years of dropping sales numbers in Europe, and the business is struggling to stay alive with all the lost money.

However, according to Marchionne, restrictions in the lending agreements between the separate car manufacturers prevent Chrysler from funding the operation of Fiat.

"We are very, very respectful of minority interests in the U.S. and there are firewalls for cash flow," Marchionne said. "When we borrowed The $7 billion last year, we borrowed it with the very clear understanding that we would segregate cash and cash flow."

Sources

Bloomberg BusinessWeek
Co.Create
Detroit Free Press

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