James R. Healey, USA TODAY
Chrysler Group filed for an initial public offering of stock this afternoon.
Share price and number to be sold have not been determined. JPMorgan is listed as the investment banker.
All the shares to be sold will come from a 41.5% stake in Chrysler held by a United Auto Workers retirement trust, the registration document says. The trust wants to cash out so it is liquid enough to pay benefits and not be so heavily invested in a single company.
The filing says, "We do not intend to pay any dividends in the foreseeable future."
If the Securities and Exchange Commission approves and the sale of shares takes place, it would be the first time since 1998 that all three Detroit automakers are publicly traded. Chrysler was bought by Germany's Daimler-Benz in 1998, then sold to private investment group Cerberus Capital.
Fiat now owns 58.5% of Chrysler and wants to buy the remaining stake that's held by the United Auto Workers Retiree Medical Benefits Trust. Chrysler and Fiat then would be fully merged into a single company.
But Fiat and the UAW trust have not been able to agree on a price after negotiations on what Fiat should pay for the trust's 41.5% stake. It acquired the the hefty ownership position as part of Chrysler's 2009 government-brokered bankruptcy reorganization.
Chrysler and Fiat CEO Sergio Marchionne has said he doesn't want an IPO. There is a significant chance the IPO will not take place if Fiat and the UAW trust can agree on a price. Indeed, the trust forced the IPO filing and could hope to boost the amount Fiat is willing to pay for the trust's stake rather than let the shares go into public ownership.
If Fiat owned all of Chrysler and merged the two automakers into a single entity, Chrysler's cash could be used to help foundering Fiat.
The two sides haven't disclosed the specifics, although the numbers kicked around have ranged from $4 billion to $15 billion. The IPO process would allow the market to set a price.
The trust also has to retain a significant portion of its Chrysler stake, keeping a pool available for Fiat to buy in several prescribed 3.3% chunks over time -- options created under the bankruptcy agreement.
Fiat sued the UAW trust in Delaware Chancery Court over the first such option, but a judge declined to set a price, saying that should be settled in a trial. It could be 2015 before such a trial began -- longer than Fiat's timetable for taking over all of Chrysler.
In filling the documents with the Securities and Exchange Commission, Chrysler is following the path of General Motors, which conducted an IPO Nov. 17, 2010, pricing its common shares at $33 and raising $20.1 billion.
It took more than two years for the shares to begin routinely trading for more than that.
Before the GM IPO, taxpayers owned about 61% of GM because the U.S. Treasury pumped money into the failing car company to preserve jobs and the U.S. manufacturing base. After the IPO, the taxpayers' share dropped to roughly 30%, and has been shrinking since then as the government sold portions of its holding over time and the Treasury said last week that its holding now are below 8%.
The two automakers' situations are different, though they arise from the same circumstance. Both were forced into government-scripted Chapter 11 bankruptcy reorganizations in 2009.
In GM's case, the government put billion of dollars into GM. In Chrysler's case, Fiat got a 20% stake in Chrysler and control of the company in return for Fiat's promise to develop fuel-efficient small cars for Chrysler and build them in the U.S., as well as to open its global distribution network to Chrysler.
Fiat was allowed to buy additional stakes as it hit various triggers in its agreement with the government, and Fiat/Chrysler CEO Sergio Marchionne had hoped to accumulate all Chrysler shares.
When Fiat took its initial stake in Chrysler, the European auto market had not yet tumbled as the U.S. market had. Now, the U.S. market is rebounding strongly and Fiat has been depending on Chrysler profits, a reversal of fortunes.
But under the bankruptcy deal Fiat does not have access to Chrysler's cash. If Marchionne is able to merge the two automakers into a single entity -- which he has said would trade in the U.S. -- money could flow freely between the two.