Fiat’s slow march to take over (and eventually merge with) Chrysler soldiers on, now hit by a snag involving the United Auto Worker’s VEBA retirement trust. The trust owns 41.5 percent of Chrysler, according to Reuters, which Fiat absolutely needs to move towards cementing its full ownership of the American automaker.
Fiat has already made an initial offer of $139.7 million to the UAW for 3.3 percent of its shares, which was rejected; the union then came back demanding $342 million, more than twice Fiat’s offer. The VEBA trust – which stands for Voluntary Employees Beneficiary Association – had been created in 2007 to help Chrysler, Ford, and General Motors to defray obligations to pay lifetime healthcare costs for UAW retirees. Instead, the trust would pay out to ex-employees, erasing the cost from the automakers’ books. According to Reuters, when GM and Chrysler underwent bankruptcy restructuring in 2009, VEBA took on stock in lieu of cash payments, hence its large share in Chrysler.
Part of the post-bankruptcy sale of Chrysler to Fiat gave the Italian automaker options to buy percentages of its American purchase upon meeting different goals, such as building a 40-mpg car in the U.S. One such option was to buy portions of the stock held by VEBA, which Fiat-Chrysler CEO Sergio Marchionne is now trying to do. Fiat currently owns 58.5 percent of Chrysler.
The UAW is asking for more cash in exchange for the 3.3 percent of shares because it claims that the $139.7 million offer is “substantially below market value,” according to Reuters.