Marchionne says Fiat no closer to Chrysler deal amid talks

Marchionne says an IPO is 'technically possible' in 2013.
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L'AQUILA, Italy -- Fiat is no closer to reaching an agreement with a UAW retiree health-care trust to buy the remaining stake it doesn't already own in Chrysler Group, CEO Sergio Marchionne said today.

Negotiations with the labor group should continue, Marchionne, who is head of both Fiat and Chrysler, told reporters today in L'Aquila in the central Italian region of Abruzzo. "We are still having chats but I don't have a deal," Marchionne said.

Chrysler filed for an IPO on Sept. 23 at the behest of the trust. Preparations for the stock sale may help resolve a pricing dispute over the trust's stake that has prevented Marchionne, 61, from completing a full takeover of the U.S. company.

"One of the things I hope is that it will become very clear exactly what the markets think Chrysler is worth, which is the only real reference point," Marchionne said to journalists.

"There's a pretty clear process that leads to the IPO, and it places clear road markers that can be recognized by both sides."

At the same time, Fiat has said an IPO of Chrysler may put the manufacturers' relationship at risk.

The Chrysler buyout talks are being closely watched by debt and equity investors, because Fiat's long-term plan to cut losses in Europe depends on its ability to easily and cheaply share technology, cash and dealer networks with Chrysler.

"The alternative scenario of a Chrysler IPO could lead to a downgrade as it could complicate overall group corporate governance and management, in particular because of a fragmented shareholding structure, and lengthen the refinancing process of Chrysler's debt," said Fitch Ratings in a note today.

Marchionne has spent the past four years working to combine Fiat and Chrysler to create a global player with the scale to compete with Toyota Motor Corp., General Motors Co. and Volkswagen Group. He has offered the trust about $1 billion less than what the labor group is demanding for its stake. The two sides may go to trial in a Delaware court as late as 2015 to resolve the disagreement.

Detroit show

Marchionne said today he doesn't know if a deal could be agreed before the Detroit car show in January. An IPO is "technically possible" in 2013 while it's likely to be ready in 2014.

Buying the trust's 41.5 percent holding in Chrysler would give Fiat access to the U.S. company's $12 billion in cash to help fund a turnaround in Europe, where the Italian company is losing money and market share. Fiat owns the other 58.5 percent of Chrysler.

The trust received the holding as part of Chrysler's government-backed recovery from bankruptcy in 2009. Although Fiat already has the right to buy the stake for about $6 billion, Marchionne has said that he's seeking to pay much less. The legal dispute centers on Fiat's offer of $139.7 million to acquire a 3.3 percent Chrysler stake from the labor group under an option agreement. The trust is demanding $342 million for the tranche.

Buoyed by a recovery in industrywide U.S. car sales to pre-recession levels, Chrysler may be valued at $13.5 billion, which would make the health fund's stake worth about $5.6 billion, according to estimates by UBS. Fiat may end up paying $4.9 billion to buy the trust's holding because of an option allowing the Italian carmaker to purchase part of the stake at a lower price, analysts at the Swiss bank said in a research report in September.

Marchionne declined to comment today on Fiat Group's 2013 target as he will update on forecasts at the end of the month, he said.

The CEO also said Europe car sales might recover starting next year though he doesn't expect any "significant" rebound.

Bloomberg and Reuters contributed to this report

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