Fiat sues Chrysler minority owner over 3.3 percent stake
(Reuters) - Fiat SpA (FIA.MI) filed a lawsuit in a U.S. court against the healthcare trust that owns part of Chrysler Group LLC, claiming the trust failed to meet its obligation to sell a small stake in the U.S. automaker after the two sides disagreed on price.
The Italian automaker wanted to pay $139.7 million (108 million euros) for the stake in Chrysler, a figure reached by using a formula set up when Chrysler emerged from bankruptcy in 2009, according to court documents filed on Wednesday.
The lawsuit is the latest in a long-running dispute between Fiat and Chrysler Chief Executive Sergio Marchionne and the minority owner over the value of Chrysler.
The trust is looking to maximize the value of its Chrysler stake to cover escalating healthcare costs for the U.S. automaker's retirees.
Fiat, which owns 58.5 percent of Chrysler, claims the healthcare trust was obligated on July 11 to sell 3.3 percent of the company, according to the lawsuit filed with the Court of the Chancery of Delaware.
The trust, known as Voluntary Employees Beneficiary Association (VEBA), is affiliated with the United Auto Workers union. It covers healthcare costs for retired workers at Chrysler, General Motors Co GM.N and Ford Motor Co (F.N). The VEBA took a stake in Chrysler as part of the company's 2009 bankruptcy restructuring.
Such a move would increase Fiat's ownership of the third-largest U.S. automaker to 61.8 percent.
As part of the 2009 agreement with the U.S. Treasury as Chrysler emerged from bankruptcy, Fiat is able to exercise call options to purchase portions of the stake held by the healthcare trust.
On July 3, Fiat told VEBA and the U.S. Treasury it would exercise the option to purchase 3.3 percent of Chrysler, to be delivered on July 11.
"At no time has the VEBA disputed that Fiat has the right to exercise its call options to purchase Chrysler membership units," Fiat said in the 11-page court filing. "Instead, the dispute between the parties relates solely to the appropriate price to be paid by Fiat."
Fiat said in a statement issued in Italy, "While it is unfortunate that we were unable to resolve the issue without the assistance of the courts, we are hopeful the matter will be resolved swiftly."
VEBA officials declined to comment on the lawsuit. Brock Fiduciary Services, which manages the VEBA's Chrysler stake, could not be reached for comment.
Fiat, acting in the lawsuit through its unit Fiat North America LLC, said that a specific formula for setting the price of the transaction was set up in a 2009 agreement with the U.S. Treasury.
Fiat said it needed the court's assistance "in the application of a specific pricing formula which was agreed in 2009 and as such unrelated to the value of Chrysler today."
VEBA currently owns the remaining 41.5 percent of Chrysler.
In the 2009 agreement, Fiat has the right to increase its stake in Chrysler by 3.3 percent every six months by using the call option, beginning July 1, 2012. This is the first of those call options.
In 2009, Fiat was the stronger of the two automakers but due largely to the economic crisis in Europe, those roles have been reversed. In July, Fiat reported a second-quarter loss of 246 million euros (US$318 million) while Chrysler reported a profit of $436 million (337 million euros) and said it would show a 2012 operating profit of at least $3 billion (2.32 billion euros).
When Chrysler emerged from its government-sponsored bankruptcy in 2009, Fiat owned 20 percent of the new company and took management control.
Since then, it has increased its ownership, in part by meeting requirements set by the U.S. government in 2009, including increasing sales outside its stronghold of North America and producing a highly fuel-efficient car.
Chrysler also paid back loans from the U.S. and Canadian governments six years early and exercised options to increase ownership.