Fiat rethinks alliance with Chrysler after IPO filing

Chrysler Group was forced to file paperwork for an IPO by its second-biggest shareholder, escalating a spat with main owner Fiat SpA which said it could scale back its commitment to the US car manufacturer.

Fiat, which owns 58.5 per cent of Chrysler, wants to take full control and buy out the rest of the stock owned by the United Auto Workers trust fund, but has balked at the $5 billion-plus being demanded.

In response, the UAW trust exercised a right enshrined in Chrysler's 2009 government-financed bankruptcy to go forward with an initial public offering, stepping up pressure on Sergio Marchionne, chief executive of both carmakers, to reach a deal.

Bankers and analysts view the filing as a move by the UAW trust to extract a better offer from Fiat and many wager an IPO will never take place.

Fiat responded angrily in the filing, which raises critical questions about when and even if Marchionne can merge the two companies to form the world’s seventh-largest auto group. The Fiat-Chrysler alliance was one of the centerpieces of the Obama administration’s 2009 restructuring of the US auto industry.

"Fiat has informed us that it is reconsidering the benefits and costs of further expanding its relationship with us," Chrysler said in its S-1 filing with the US Securities and Exchange Commission.

Chrysler added that Fiat is also reconsidering the terms on which the Italian carmaker will continue to share its technology, vehicle platforms, engineering expertise and other resources with Chrysler.

"Fiat is saying that Chrysler is worth less if we don't get that full integration," said Richard Hilgert, an analyst with investment research firm Morningstar. "It's a shot across the bow of the UAW."

The IPO filing comes the same day that General Motors bought back preferred shares held by the UAW trust for about $3.2 billion. – (Reuters)