Fiat-Chrysler merger still on track despite lawsuit: CEO

PARIS (Reuters) - Plans for Fiat SpA (FIA.MI) to merge with Chrysler Group LLC will not be affected by a lawsuit over the price Fiat is to pay for an additional 3.3 percent stake in the U.S. automaker, Sergio Marchionne, chief executive of both Fiat and Chrysler, said on Thursday.

Fiat now owns 58.5 percent of Chrysler, the No. 3 U.S. automaker.

While Marchionne said that the plans for a full merger are on track, he did not specify the timing. Previously, he has said he wants the two companies to be merged by 2014.

Marchionne said the dispute over how much Fiat should pay for another 3.3 percent of Chrysler from a union-affiliated retiree healthcare trust is "completely separate" from talks to buy up all of Chrysler.

Marchionne said he was not sure when a Delaware court in the United States would rule on the lawsuit Fiat filed on Wednesday against the minority owner, the Voluntary Employees Beneficiary Association (VEBA).

"There is no court date yet, that's not up to us," he said during a news conference at the Paris auto show. "But I think it will be soon."

The language of the 2009 agreement involving the U.S. Treasury as part of Chrysler's emergence from bankruptcy is vague regarding call options for Fiat to buy pieces of Chrysler, which has forced the issue to court, Marchionne said.

Fiat offered to pay $139.7 million (108 million euros) for a 3.3 percent stake in Chrysler, which would increase Fiat's share of the Auburn Hills, Michigan-based automaker to 61.8 percent.

While VEBA officials declined to comment, Fiat says the issue is the price it should pay for the stake.

Also from Paris, Marchionne said he believed that plant closures in Europe to alleviate auto manufacturing overcapacity are "more likely" due to the current economic crisis on the continent.

Meanwhile, Fiat shares fell on Thursday in part because some traders believed that the lawsuit shows that the Italian automaker may have more difficulty than expected in buying more of Chrysler, which is making profits while Fiat has floundered amid Europe's economic doldrums.

Fiat contends that the healthcare trust was obligated to sell the stake in line with the 2009 agreement with the U.S. Treasury.

"The language in the VEBA option contract was written in 2009," Marchionne said. "It appears now the language was unclear. There is no other way to resolve this dispute than in court. We've disagreed about the language. We agree to disagree."

The VEBA healthcare trust 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.

In trading Thursday, Fiat shares fell 2.1 percent, and were down as much as 3 percent, a steeper fall than the wider European autos and auto parts index, which slid 0.5 percent.

"The catalyst for the recent rise in Fiat's shares was the expectation it will purchase the whole VEBA stake in Chrysler," a Milan-based trader said. "Given that there is a controversy on the price for a 3.3 percent holding, the fear is that the overall stake sale process won't be as simple as previously thought."

Fiat shares reached 4.90 euros ($6.31) two weeks ago but by close of trading Thursday had fallen 13.7 percent to 4.23 euros ($5.45).

($1 = 0.7739 euro)

(Additional reporting by Silvia Aloisi in Milan and Bernie Woodall in Detroit; editing by Matthew Lewis)