Fiat must pay at least $342 million to boost its ownership stake in Chrysler Group to almost 62%, the U.S. automaker's minority shareholder said in a court filing.
The amount sought by the $54 billion UAW Retiree Medical Benefits Trust, Ann Arbor, Mich., is 145% more than the $139.7 million that Fiat said the additional Chrysler holding should be worth in an earlier court filing. Fiat sued Sept. 26 in Delaware Chancery Court to confirm the price owed to the health-care trust.
CEO Sergio Marchionne has said Fiat's ability to complete a full merger with Chrysler is limited by a costly turnaround plan for Fiat announced last month. He has said Fiat still plans to use call options that were part of Chrysler's 2009 Chapter 11 bankruptcy and now are in dispute. “We're quite willing and capable and able and we're standing by our call options to exercise them as they become due,” Mr. Marchionne said on Chrysler's quarterly conference call Oct. 30. He said he's still targeting the “unification” of Fiat and Chrysler by 2015.
Fiat has said it will increase its controlling stake in Chrysler to 62% after completing the first call option purchase from the trust. The Delaware Chancery Court may rule on the matter by the end of the year, Mr. Marchionne said in the conference call.
Richard Gaeselli, a Fiat spokesman, didn't immediately respond to an e-mail seeking comment on the trust's filing Monday.
As part of Chrysler's 2009 bankruptcy, Fiat was granted the call options to purchase a portion of the trust's stake every six months through June 2016. The agreement covered 40% of the trust's holdings.
The trust's lawyers filed a response to Fiat's suit claiming the UAW VEBA violated an agreement to sell the shares.
The VEBA's attorneys also filed counterclaims to Fiat's suit, arguing the automaker sought to pay only “a fraction of” the shares' fair-market value, the lawyers said in the filing.
Sales of the shares at Fiat's price “is not in the interests of retirees and their dependents who rely on the VEBA to fund health-care benefits,” the lawyers said.
At issue in the case is the agreement's methods for assessing the shares' value given Chrysler's rebound, Richard Hilgert, an analyst for Morningstar Equity Research in Chicago, said in a telephone interview Monday.
“What the UAW is trying to do is get the court to look at what the performance of Chrysler has been since Marchionne and his management team took it over,” Mr. Hilgert said. “The cash flows that are being generated out of Chrysler now are such that the UAW feels a more appropriate valuation for the company would be the higher amount that they're proposing.”
