Investors Worry About Fiat Cash

Fiat SpA may need to raise €1.6 billion to €2.9 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 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 slipped to €7.8 billion on Sept. 30 from €10.2 billion at mid-year. The company also has €2 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 (€110 million) for 3% of Chrysler and is demanding $342 million (€268 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.