Chief Executive Sergio Marchionne discouraged investors at a conference last week from participating in Chrysler Group LLC's initial public offering - a process that was forced by the automaker's second-largest shareholder last month.
Marchionne, who is also the CEO of Fiat SpA FIA.MI, said Chrysler has a financially attractive future, including forecasts for a 7 percent to 8 percent profit margin by 2015, according to a Bernstein Research note published Tuesday.
But he "did not believe investing via this partial IPO would be the most attractive route for investors," Bernstein analyst Max Warburton wrote of Marchionne's comments at a Bernstein Research investors conference last week in London.
He added that Marchionne implied that investing in Fiat or in the joint Fiat-Chrysler company later would be a better bet.
Marchionne wants to avoid an IPO by having Fiat purchase all shares of Chrysler from a union-affiliated retiree healthcare trust that currently owns 41.5 percent of Chrysler. Fiat owns the rest, 58.5 percent.
The trust, known as a voluntary employees beneficiary association (VEBA), was given a stake in Chrysler as part of the third-largest U.S. automaker's bailout in 2009. A provision in the bankruptcy deal allows the VEBA to force Chrysler to go public in order to achieve the highest possible payout.
Fiat has balked at the $5 billion being demanded by the healthcare trust for its stake in the company. As a result, the trust, which is affiliated with the United Auto Workers union, exercised the right to call for an IPO, putting pressure on Fiat to make a deal.
On Wednesday, neither Chrysler nor the VEBA commented on the report.
Marchionne said he will speak positively about Chrysler during any "road show" presentations to investors leading up to an IPO as he did at the Bernstein conference, Warburton wrote.
The research paper issued by Bernstein is titled, "Chrysler - The IPO That Will Not Happen."
Warburton, as have other analysts previously, said he believed an IPO was unlikely because Fiat and the VEBA healthcare trust would come to an agreement before such a public offering was made.
"Fiat's purchase of Chrysler will require further negotiation, but ultimately we expect it to complete," Warburton wrote. "The situation is fascinating but ultimately we believe it is in both sides' interests to do a deal."
(Reporting by Bernie Woodall and Deepa Seetharaman; Editing by Prudence Crowther)