The Fruit of Fiat and Chrysler Alliance: IPO Set to 2014

Chrysler recently announced that all of its shares will be open to the public once they are listed. Originally set to December 2013, eager investors should hold their excitement until next year. Fiat S.p.A, an Italian automaker, is Chrysler’s newest majority owner and the latter’s board has seen that the scheduled 2013 IPO is not practicable. Chrysler Group LLC will continue working on the initial public offering so it can finally open on the first quarter of 2013.


Stock Code: CGC

Once the IPO finally fires up at the New York Stock Exchange, the stock code will become “CGC.”

Fiat now owns 58.5 percent of shares from Chrysler, while a United Auto Workers union trust fund holds the remaining 41.5 percent. The said trust pays for the medical care of retirees. The estimated cost in last month’s filing will be $3.1 billion more than the worth of its assets.

However, CEO Sergio Marchionne is determined to buy the trust’s shares to combine both companies.

The CGC IPO will consist of shares held by the trust. UBS AG set the trust’s stake at $5.6 billion during the previous month. The IPO’s pricing process could be the needed stimulus to finally reach agreement among the two parties. Italian automaker, Fiat, has already gone to court for a price judgment. The trial date is set next September.

Chrysler’s balance sheet has been positioning Fiat for the entire year as the latter tries to survive a down European market. Marchionne believes that the companies must first merge in order to begin spending Chrysler’s cash on the operations of Fiat.

Fiat needed the support of Chrysler; otherwise, the Italian automaker would have shedded $340 million. It gained $260 million in the third quarter due to the last quarter U.S sales of Chrysler on the Jeep Grand Cherokee and Ram pickup.

Sharing Technology for a Better Future

The current agreement between Chrysler LLC and Fiat S.p.A is non-binding, but should turn into a finalized partnership by April. The two automakers see an alliance that share distribution channels, technology and vehicle platforms. Chrysler hands a part of itself to Fiat as an exchange for a more viable product development.

A Mutually – Beneficial Agreement

The U.S lawmakers wants to promote the need for small and fuel – efficient vehicles in the country, which Chrysler wants to take advantage of. This has been made a part of the agreement between the Fiat – Chrysler alliance, along with improved distribution of its products in Europe, India and Brazil. Not to mention Fiat’s deal with Chinese automaker Chery that Chrysler has been eyeing on.

For Fiat, an agreement to improve distribution channels in the U.S will boost their drive for global entity. Of course, this will only happen with the help of Chrysler’s distribution network. It will also utilize the excess global production capacity in order to assemble some of its Chrysler –badged product variants. This agreement will assist the Italian automaker to continue manufacturing, even at pre–slowdown levels.

Both automakers are looking forward to improve global supplier ties that should result to better savings with larger volume.

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Published on: December 23, 2013

Filled Under: Chrysler

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