After walking away from unsuccessful negotiations in August for Fiat to buy the United Auto Worker-controlled 41.5-percent stake in Chrysler in the form of a Voluntary Employee Beneficiary Association trust, Bloomberg reports that the two parties are coming together to try to hammer out a deal for a private sale of the VEBA’s stake. The two sides have been far apart over the valuation up until now, but are reportedly closer than they have been in the past.
Chrysler is trying to avoid the prospect of an initial public stock offering, which would set a market value for the price, and could force Fiat to pay a retail price for the VEBA stake. The price Fiat would pay in a pre-IPO scenario is reportedly capped at $6 billion due to contractual agreements between the UAW and Fiat.
One of the reasons the UAW has been so adamant about getting top dollar for its stake is the estimated $3.1 billion shortfall between the value of its stake, and the outstanding obligations for retirees’ medical care. Fiat wants the remaining stake in Chrysler to unlock value from its profitable and successful North American operations to shore up its struggling European operations.