Marchionne says Fiat is in talks with banks about Chrysler merger
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GENEVA (Bloomberg) – Fiat and Chrysler CEO Sergio Marchionne said he is in talks with banks about financing a merger of the two automakers.
"It's the right thing to bring these two organizations together," Marchionne said of Fiat and Chrysler in an interview at the Geneva auto show. "We do have availability of funding to try and close this transaction."
Marchionne is relying on U.S.-based Chrysler to sustain earnings as he works to end losses at Fiat's mass-market brands in Europe by as soon as 2015. The Italian carmaker would have posted a 1.04 billion-euro ($1.35 billion) loss in 2012 without Chrysler.
The executive didn't comment in detail about the discussions with banks. "I have renewed a number of friendships in the banking sector," Marchionne said on Tuesday. "I've received a number of warm and fuzzy notes from CEOs and chairmen who want to help. They recognize the fact that this is a valid thing to do."
Fiat was discussing financing options with banks to straighten its balance sheet in preparation to buy the 41.5 percent of Chrysler it doesn't own, three people familiar with the matter said last month.
The United Auto Workers union's voluntary employees beneficiary association, a medical benefits trust for Chrysler retirees, owns the remaining Chrysler stake not held by Fiat.
Different objectives
A Fiat-Chrysler merger can be done "in a way which meets both VEBA's objective and ours," Marchionne said. If Fiat and the VEBA can't agree, the "only alternative is to take it for an" initial public offering, he said. "It's highly unlikely that ultimately, faced with a real market test, that Fiat and VEBA would disagree on value."
Officials from Chrysler and the VEBA met on Monday with banks about an IPO, Marchionne said. The process will help set a price for the stake, which Fiat has enough resources to acquire, he added.
Marchionne, during an appearance at a Chrysler transmission plant in Indiana last week, said he didn't expect "any clarity on this until the third quarter of this year." The CEO said at that time his "best estimate" is that Fiat has a 50-50 chance of avoiding a Chrysler IPO and creating "one organization."
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