Chrysler IPO Filing Triggers Showdown between Fiat, Union Trust

This week's filing for a possible initial public offering by Chrysler Group LLC has triggered a final showdown between Fiat SpA and the United Auto Workers union healthcare trust that owns 41.5% of the carmaker.

Fiat, which owns 58.5% of Chrysler, wants to buy trust's stake for at least $1 billion (€742 million) less than the trust believes its holding is worth.

The trust has pushed for the IPO in hopes of maximizing the value of its shares. Fiat has countered by cautioning that it is now reevaluating whether to expand its relationship with Chrysler or limit future investments in the company.

In a veiled warning to the UAW, Fiat implies that going through with the IPO might cause the Italian company to cut back on spending for Chrysler plant expansions and perhaps shift some future capacity away from the U.S.

Fiat-Chrysler CEO Sergio Marchionne has repeatedly used a similar tactic in Italy threatening to halt investments and move production to other countries to win work rule concessions at its domestic plants.

Analysts say Fiat is betting that investors will help resolve the Chrysler valuation issue and avoid an IPO. They point out that Fiat's threat of pulling back on its commitment to Chrysler could lower the potential share price of an offering, thereby pressuring the trust to settle on a sale price for its stake.