Fiat will need to pay $342 million to exercise its option to purchase an additional 3.3 percent stake in Chrysler, the United Auto Workers’ VEBA health care trust stated in court documents filed on Monday.
The Italian automaker has filed a lawsuit against the trust for failing to sell the stake, which it values at $139.7 million – a figure reached through a formula that was created when Fiat assumed control of Chrysler as it emerged from bankruptcy back in 2009. In response, the trust has filed a counterclaim to Fiat’s suit, claiming that the Italian automaker is looking to pay just "a fraction of" the shares' fair-market value.
"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," Richard Hilgert, an analyst for Morningstar Equity Research, said in a interview with the Detroit News.
"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."
Fiat, which currently controls 58.5 percent of Chrysler, hopes to eventually own the Auburn Hills-based automaker in its entirety. That would allow a full merger between the two companies and give Fiat access to Chrysler’s cash – which could be vital for Fiat as it looks to weather record-low sales in Europe as a result of the region’s sovereign debt crisis.
One of the terms of Chrysler’s bankruptcy agreement gives Fiat the option to purchase up to 3.3 percent of Chrysler from the trust – which holds the other 41.5 percent of the company - every six months through 2016. Fiat can also opt to purchase the remainder of Chrysler from VEBA for $4.25 billion in addition to 9 percent annual interest dating back to January 2010. However, Fiat’s European struggles will likely prevent it from acquiring the rest of Chrysler for the near future.