Marchionne says Chrysler IPO could be delayed

Associated Press
Fiat and Chrysler CEO Sergio Marchionne talks during the shareholders meeting of Fiat Group at the Lingotto Fiat headquarters in Turin, Italy, Turin, Wednesday, March 30, 2011. Marchionne said the two automakers potentially could generate combined revenues of €100 billion ($141 billion) by 2014. Marchionne expects Fiat's revenues alone to nearly double from €35.8 billion 2010 to €64 billion. Fiat SpA, which took over Chrysler LCC after it emerged from bankruptcy 21 months ago, is in the process of relaunching Chrysler, which still has not returned to profit. The automaker dramatically narrowed losses in 2010, and forecasts net income of $200 million to $500 million for 2011.(AP Photo/Massimo Pinca)
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Fiat and Chrysler CEO Sergio Marchionne suggested Wednesday that Chrysler may delay its initial public offering depending on the cash needs of the U.S. automaker and the auto workers union trust fund.

Marchionne has previously hinted that an IPO could happen by the end of the year.

He said a decision on whether and when to take Chrysler public would depend on how much the automaker itself and the United Auto Workers health care trust, which pays health benefits for retirees and holds a 63.5 percent share in Chrysler, need liquidity.

"If those two needs are not there, then the IPO of Chrysler may or may not become relevant," Marchionne told reporters after a Fiat shareholders meeting.

But he added: "It is rational, maybe reasonable, to expect that there will be an IPO. It can't be done very quickly. We just filed with the SEC, we're still working our way through the comments. We have to get ready to be a public company again, and issuing securities takes time. We should do it properly."

Fiat SpA, which took over management of Chrysler LCC 21 months ago, increased its stake in the once-bankrupt automaker, Detroit's third largest, to 25 percent this year. Marchionne confirmed that it expects to raise it to 35 percent by the end of the year. At that point, it could go even further and raise its stake to majority 51-percent stake if Chrysler repays loans to the U.S. and Canadian governments. Marchionne is talking to banks about refinancing.

"Our goal remains to achieve a stake of more than 51 percent within the year," Marchionne said. At that point, Chrysler could launch an IPO.

Marchionne said Fiat had other options for further increasing its stake beyond 51 percent — including the possibility to acquire an additional 8-percent stake from the U.S. Treasury, he said. Treasury owns 9.2 percent of Chrysler while the Canadian government holds another 2.3 percent.

Marchionne also said that Chrysler production will probably be "negatively impacted" by the supply chain problems created by the tsunami and earthquake in Japan earlier this month. Chrysler has already said it has had to stop taking orders for certain paint colors because a specialized pigment produced in Japan is not available, and Marchionne said delivery of electronics components to Chrysler has been slowed.

"It will probably have a negative impact on production, particularly in the United States," Marchionne said. He did not specify models or otherwise estimate potential production delays.

"It is an evolving scenario. ... What we are looking at is a dislocation of anywhere from one to three weeks," Marchionne said.

Fiat's European and Brazilian businesses don't appear to be impacted, he said.

Katie Hepler, a Chrysler spokeswoman at its headquarters in Auburn Hills, Mich., would not comment Wednesday on possible U.S. production cuts.

Marchionne told shareholders earlier that the two automakers potentially could generate combined revenues of €100 billion ($141 billion) by 2014.

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