Fiat May Need More Cash to Buy Rest of Chrysler

Fiat SpA may need to raise €1.6 billion to €2.9 billion ($2 billion-$3.7 billion) to finance the acquisition of the 41.5% of Chrysler Group it doesn't already own, Bloomberg News reports, citing a report by UBS analyst Philippe Houchois.

The news service says the 5% drop in Fiat shares to €3.31 ($4.22) on Tuesday reflects investor worries about the company's cash position.

Fiat-Chrysler CEO Sergio Marchionne said last week that the Italian carmaker has enough cash to carry out its European restructuring and buy the rest of Chrysler.

Fiat's cash position (excluding Chrysler's cash) slipped to €7.8 billion ($9.9 billion) on Sept. 30 from €10.2 billion ($13 billion) at mid-year. The company also has €2 billion ($2.5 billion) in untapped credit lines.

The definition of "enough cash" depends, of course, on the cost of the shares. Houchois opines that Fiat will need to pay fair market value to buy the stock from a union-run retiree healthcare trust in Detroit.

The trust rejected Fiat's offer in July of $140 million for 3% of Chrysler and is demanding $342 million for the stake. On Jan. 1, the trust can request to sell its shares on the open market, thus forcing an initial public offering.