* Fiat says expects Chrysler to work on IPO for Q1 2014
* Fiat says uncertain if and when IPO will happen
* IPO delay prolongs uncertainty over potential Fiat-VEBA deal
MILAN, Nov 25 (Reuters) - The planned stock market listing of Fiat's U.S. unit Chrysler will not take place this year, the Italian carmaker said on Monday, prolonging the uncertainty over its chances of buying out the rest of the company.
The initial public offer, which Fiat CEO Sergio Marchionne had previously said could take place in 2013, was expected to shed light on the U.S. carmaker's value and help settle a long-running spat between Fiat and a healthcare trust which owns 41.5 percent of Chrysler.
"The Board of Directors of Chrysler Group ... has determined that it will not be practicable for Chrysler Group to launch and complete an initial public offering prior to the end of 2013," Fiat said in a statement.
It said it expected Chrysler to work towards an IPO in the first quarter of 2014, but added it could not say if and when such an offer would happen as it would depend on "market conditions and other relevant considerations".
Fiat, which has a 58.5 percent stake in Chrysler, wants to buy the rest of the U.S. carmaker, but has not been able to agree a price with the United Auto Workers (UAW) union, which owns the rest via its retirees' healthcare trust VEBA.
Chrysler filed paperwork for an IPO in late September.
Investors had hoped that the preliminary work for the IPO of part of the VEBA stake might have helped narrow the difference between the two sides, and that they could reach a deal without carrying out the share sale.
"Nobody really believes there will be an IPO, but any delay in the IPO process means there will be a delay in the two parties striking a deal," a Milan-based analyst said. "The stock is reacting on the uncertainty."
Fiat shares fell as much as 3 percent after the statement, and were down 3.1 percent at 5.77 euros by 1532 GMT, compared with a 0.45 percent fall in Milan's blue-chip index.
According to the Wall Street Journal, Chrysler expects to raise between $1.5 billion and $2 billion in the IPO. Based on the 16.6 percent stake that the trust has demanded the company register for the IPO, this would imply a total value for the U.S. firm of between $9 billion and $12 billion.
Fiat declined to comment on the report, while Chrysler could not immediately be reached. Some analysts have said the company is worth around $10 billion.
Marchionne, the CEO of Fiat and Chrysler, wants to merge the two firms to create the world's seventh-largest carmaker.
The UAW became Chrysler's second-largest shareholder when the automaker emerged from bankruptcy in 2009 and the union took a stake in place of future healthcare payments. VEBA manages those healthcare benefits on behalf of the union.
Chrysler, which Fiat has been running since a bailout deal with the U.S. government, is now a profit centre for Fiat.
The Italian carmaker has been hurt by sagging sales for automobiles in Europe, while Chrysler's home North American market has seen sales rise nearly 50 percent since 2009.
The Chrysler buyout talks are being closely watched by debt and equity investors, because Fiat's long-term plan to cut losses in Europe depends on its ability to easily and cheaply share technology, cash and dealer networks with Chrysler.
Chrysler and Fiat currently are forced to manage their finances separately. A full merger would make it easier - but not automatic - to combine the cash pools of the two companies, giving Fiat more funds to expand its product lineup.