Fiat CEO: plan to buy Chrysler shares

NEW YORK, Fri Dec 14, 2012 — Italian carmaker Fiat SpA fully intends to acquire the 41.5 percent of Chrysler Group shares that it does not now own, but wrangling over the price could continue for a while, Fiat-Chrysler chief Sergio Marchionne said on Friday.

Fiat is in arbitration proceedings with the owner of the shares, a United Auto Workers trust fund that pays medical benefits to retired workers. The trust fund acquired the shares during the U.S. government-sponsored bankruptcy and bailout of Chrysler in 2009, when Fiat gained an ownership stake and management control of the U.S. automaker.

“We’ve always taken the position that we would have to pay them, but the question is price,” said Marchionne, speaking on the sidelines of a meeting of the Council for the United States and Italy, an international-relations group. The current arbitration proceedings, he added, are “part of the dance.”

Time not on Fiat’s side in billion dollar Chrysler deal

MILAN/DELAWARE, Fri Dec 7, 2012 — Fiat’s bid to win full control of more profitable Chrysler is set to become more expensive in a few weeks, as a court ruling on a price dispute drags on and Chrysler’s possible share flotation looms.

The Italian carmaker has 58.5 percent of Chrysler, and a right to buy 16.4 percent more over the next three years at a price determined by a formula worked out in 2009 when Chrysler was exiting bankruptcy.

But a dispute over the price has ended up in a Delaware court, which will decide whether Fiat must pay up to $1.70 billion as demanded by VEBA, a carworkers’ union’s healthcare trust, for the stake. The ruling is unlikely to come by the end of the year as Fiat hopes.

“That works in VEBA’s favor,” said Brian Quinn, a professor at Boston College Law School. “If Fiat wants to get this done by year-end, it will have to settle.”

The amount VEBA wants is double the $754 million Fiat has calculated the stake is worth, based on the formula.

Right now Fiat and VEBA are circling each other like two wrestlers before a fight. Fiat wants VEBA’s stake, and VEBA wants Fiat’s cash. There is only one buyer — Fiat.

 

That changes from January 1, when VEBA gains the right to sell part of its Chrysler stake in an initial public offering.

That gives it important leverage in any future negotiations with Fiat and could make the price Fiat pays more expensive.

Sergio Marchionne, at the helm of both Fiat and Chrysler, said in October the legal spat could be resolved by year-end.

But law experts say the lawsuit could drag on for months.

“It’s really hard to see how this (case) could get prepared, tried and decided in less than two months,” said Larry Hamermesh, a professor at Widener University School of Law in Wilmington Delaware.

“Barring some showing of need for expedition, or a settlement, I’d say upwards of a year from now would be optimistic.”

Chrysler new-car sales in May miss estimates

DETROIT, Fri Jun 1, 2012 – Chrysler Group posted a 30 percent increase in May new-car sales in the U.S. market but fell short of what analysts had expected.

Chrysler, controlled by Italy’s Fiat, reported May sales of 150,041 vehicles, up from 115,363 in the same month last year. While it was the best May sales performance for Chrysler in five years, the results were below several analysts’ estimates.

The rest of the U.S. auto industry is scheduled to report sales results later Friday. Economists polled by Thomson Reuters expect an annual sales rate for the month of 14.5 million vehicles.

Some industry officials expect the rate to be lower, however, as warmer weather earlier in the year pulled demand forward and led to stronger-than-expected sales. In addition, falling gas prices have reduced the pressure on consumers to get rid of gas-guzzlers and buy more fuel-efficient cars.

Auto sales have been one of the bright spots in the economy for several months and the monthly sales results offer an early snapshot of consumer demand.

Sales have shot up this year despite cooling consumer confidence and mixed economic data that illustrates how shaky the recovery has been over the last three years.

One factor fueling the sales growth has been Americans’ increasing need to replace their aging cars and trucks, which are now a record 10.8 years old on average.

Higher fuel prices in the first quarter prompted some consumers to swap older, less fuel-efficient models to lock in fuel savings. According to Swiss bank UBS, 63 percent of dealers said higher gasoline prices increased demand in the first quarter.

With gas prices falling again, the pace of new-car sales may moderate in the second and third quarters, but the underlying consumer appetite for new cars and trucks as a result of pent-up demand remains strong, UBS analyst Colin Langan said.

Chrysler reports full-year profit on strong U.S. sales; sees higher 2012

DETROIT – U.S. automaker Chrysler Group LLC swung to a full-year net income of $183 million on Wednesday, and made the bold prediction that profit would be eight times higher in 2012, on strong sales in its main U.S. market.

In its second full year managed by Italy’s Fiat SpA and its hard-charging chief executive Sergio Marchionne, Chrysler turned a net profit of $183 million, up from a loss of $652 million in 2010. The company set a target for about $1.5 billion in net profit in 2012.

Chrysler 2011 sales reached $54.98 billion, a 31-percent rise from 2010, linked closely to strong sales in its home U.S. market.

Marchionne, also the CEO of Chrysler, said of the Detroit-area automaker, “Our house is in good order.”

Later on Wednesday, Marchionne will address the state of the larger Fiat, which also reports quarterly and annual results.

Fiat took control of the third-biggest U.S. automaker in 2009 as part of a government bailout.

Last year was the first time a company named Chrysler reported a net income since 1997, when the company showed a net profit of $2.8 billion.

From 1998 until 2007, as a unit of Daimler AG, Chrysler reported only an operating profit or loss, and last posted an operating profit in 2005, at $1.8 billion. It did not post profits when from 2007 to 2009 when it was owned by private equity firm Cerberus Capital Management.

Fiat ups Chrysler stake by 5 percent in move towards merger

DETROIT ― Italy’s Fiat SpA has raised its stake in Chrysler Group LLC by 5 percent to 58.5 percent, meeting a final target set by the U.S. government as the two groups move closer to creating one of the world’s leading auto makers.

Fiat has managed Chrysler since a 2009 bailout deal with the U.S. government. It has paid a total of around $2 billion for its majority stake and agreed a number of conditions to be met before a full merger could take place.

Sergio Marchionne, CEO of both groups, has made Fiat one of Europe’s top turnaround stories and wants to elevate the company to a global player through Chrysler.

“The acquisition of a further 5 percent of Chrysler is a fundamental step in completion of the integration between our two groups,” Marchionne said in a statement on Thursday.

Chrysler and Fiat said they had formally committed to the U.S. Treasury Department to produce the 2013 Dodge Dart sedan at a Chrysler plant in Illinois, the last performance event of three agreed with Washington in 2009.

That commitment, along with proving late last month to the U.S. Environmental Protection Agency that the new Dart can achieve an unadjusted combined fuel economy of 40 miles per gallon, triggered the 5 percent ownership increase. The group had said it would reach the target by the end of 2011.

“There was no real new element today, they have jumped the first, the second and now the third fence,” a Paris-based analyst said.

The remaining 41.5 percent ownership of Chrysler remains with a healthcare trust, called VEBA, affiliated to the United Auto Workers union.

Marchionne told Reuters in December it was possible Chrysler would have an initial public stock offering in 2013 as the UAW seeks to cash out or reduce its shareholdings.

Marchionne: next Chrysler CEO likely to be named after 2015

TRAVERSE CITY, Mich. ― Sergio Marchionne, the chief executive of both Chrysler and its controlling shareholder Fiat SpA, said he hoped to stay on through 2015 and would groom a successor from within the company’s ranks.

Marchionne, who orchestrated Fiat’s management takeover of the U.S. automaker, has been the architect of Chrysler’s revival after a 2009 bankruptcy funded by the Obama administration.

Some auto industry executives and bankers have privately questioned how long Marchionne could sustain an intense, hands-on management style marked by long workdays and frequent flights between Turin and Detroit.

Speaking at an industry conference on Wednesday, Marchionne said he hoped that a merged Chrysler-Fiat would become one of the industry’s largest global competitors.

“It’s going to be up to the guy after me, after 2015 hopefully,” Marchionne said during a question and answer session at an industry conference. “Maybe a year later, I don’t know. I’m 59 now. There’s going to be a guy after me, that’s for sure.”

Marchionne’s mention of a successor corresponded to a dip in Fiat’s share price. The shares closed 1.73 percent lower at 5.98 euros on Wednesday.

Marchionne later told reporters, in response to a question: “I brought up 2015 as a point of reference. But the last thing we want is speculation about when I’m going to leave. I technically can go beyond 2015.”

The 2015 mark would be a year after Chrysler completes its five-year turnaround plan, which was outlined in November 2009. The plan calls for Fiat and Chrysler to sell a combined 6.6 million cars and trucks by 2014, up from just over 3.6 million in 2010.

A successor to Marchionne will likely come from the newly formed group executive council, a team of 22 Fiat and Chrysler executives that will oversee the integration of the two automakers. The majority of the council is made up executives from Fiat.

Fiat CEO Marchionne says there’s no rush to buy VEBA’s Chrysler stake

TURIN, Italy ― Fiat SpA is in no rush to buy the remainder of Chrysler from a United Auto Workers trust fund and cannot be forced to launch a Chrysler IPO until 2013, Fiat Chief Executive Sergio Marchionne said.

The Italian carmaker has increased its stake in Chrysler to 52 percent, raising speculation Marchionne may be aiming to take full control of Chrysler ― of which he is also chief executive.

The VEBA trust fund holds a 45.7 percent stake in the Detroit-based carmaker.

“We are not obliged to buy (the VEBA stake),” Marchionne told reporters on Monday.

“We have the right to buy a portion of their interest. We can start discussions in the second half of 2012. And they can’t force the company to launch an IPO before 2013, so we have a lot of headroom going forward,” Marchionne said.

The VEBA fund is not planning a quick exit from Chrysler and is looking at various options to cash in on its holding, sources familiar with its strategy told Reuters last week.

These include selling to an investor which could be Fiat or selling in a public share offering, the sources said.

Fiat, which has managed Chrysler since a 2009 bailout, took its stake in the number three U.S. carmaker past the 50 percent mark last week after the U.S. Treasury agreed to sell its remaining 6 percent holding for $500 million. Fiat also agreed to pay $75 million for the right to buy all of VEBA’s stake for a capped “threshold amount” ― which was set at $4.25 billion in 2009, increasing at a 9 percent annual interest rate, so analysts say it has now risen to around $5 billion.

Fiat already had an option to buy 40 percent of the VEBA stake, starting in June 2012, and Marchionne said it had plenty of time to make up its mind.

“The dialogue (with VEBA) has always been open. But there has been nothing in particular about their position as shareholders in Chrysler,” Marchionne said.

Fiat has also offered $125 million to buy the Canadian government’s 1.7 percent stake in Chrysler, as Marchionne tries to strengthen Fiat’s grip on the company.

Delay makes Chrysler stake buy costlier: Fiat CEO

TURIN, Italy / DETROIT ― Italian carmaker Fiat’s chief executive said Wednesday postponing the purchase of a stake in Chrysler Group held by the U.S. Treasury would only make any potential deal more expensive.

Fiat exercised an option on Tuesday to acquire a further 16 percent of the Detroit-based carmaker bringing its stake to 46 percent following Chrysler’s repayment of $7.6 billion in U.S. and Canadian government loans from its 2009 bailout.

Asked about the possibility Fiat may buy the 6.6 percent stake in Chrysler held by the U.S. Treasury, Sergio Marchionne said: “The more we wait, the costlier it becomes.”

Marchionne, chief executive at Fiat as well as Chrysler, declined to give further detail.

Ron Bloom, the Obama administration’s point man for auto restructuring, has said the government wants to dispose of the common equity stake it still holds in Chrysler “as soon as practical.”

Speaking to reporters as he arrived in Turin for the presentation of Fiat’s new Lancia Ypsilon model, Marchionne said Fiat would consolidate Chrysler in its financial results from June 1 ― ahead of some analysts’ expectations.

Asked about a possible listing of Chrysler, he said the timing of an initial public offering  depended on plans by the healthcare trust affiliated with the United Auto Workers union, known as the Veba, to cash in its 45.7 percent stake in the U.S. automaker.

“Whether or not to list Chrysler has only a relative value for Fiat,” he said. “(An IPO) depends on market conditions and (Veba’s) targets, not on us.”

Marchionne repeated Fiat would meet a target to bring its stake in Chrysler to 51 percent in the fourth quarter.

To help achieve this figure, the U.S. carmaker is expected to develop a vehicle that gets 40 miles per gallon on a Fiat platform in the last quarter of 2011.