Chrysler owners in game of chicken

The revived US car giant has filed papers for a share sale as owners Fiat and United Auto Workers battle over merger plans

On the east side of Detroit, the sprawling Packard Automotive Plant lies in disrepair. Parts of the complex, once among the largest and most-modern facilities of its kind in the world, have become dens for criminals and drug addicts. Other sections have devolved into an easy resource for scrappers looking for metal.

But drive a few miles further east and you will come across a different kind of monument: the Jefferson North Assembly Plant, the only active car factory entirely within the city limits (a second factory, operated by General Motors, straddles the border of Detroit and the neighbouring community of Hamtramck).

Thousands of workers stream into Jefferson everyday to build Jeep Grand Cherokees and Dodge Durangos for Chrysler, an unlikely sight at a facility which back in 2009 seemed headed for decline.

At the time, its owner, Chrysler, was on its knees along with the other "Big Three" American car manufacturers. Eventually, it had to resort first to a government bailout and then a forced marriage with Fiat, a stronger Italian manufacturer.

But that was then: today, following a successful revival that has boosted profits and led to a more than tripling of the workforce at the Jefferson facility, the business has arguably become the stronger member in the partnership as Fiat faces the economic headwinds tormenting companies across Europe.

The role reversal explains the game of chicken currently under way over the question of Chrysler's future, and why it reluctantly filed for an initial public offering (IPO) this week.

The company put in the paperwork after being prodded to do so by a retirement trust fund run by the United Auto Workers (UAW) that owns 41.5 per cent of the business.

The filing came over the objections of Chrysler's chief executive, Sergio Marchionne, who is also the boss of Fiat, and who wants to merge the two businesses and create a car making behemoth that would be the world's seventh-largest car maker.

The combination would create a company with enough scale to compete against rivals such as General Motors and Volkswagen, and also strengthen the relationship between the two businesses, particularly to the benefit of Fiat as its European operations suffer.

A combination would also give Fiat access to the around $12bn (£7.5bn) in cash held by Chrysler.

In the past, Mr Marchionne has portrayed a merger as "inevitable". Earlier this year, he told Associated Press he hoped to achieve more clarity on the deal by the end of 2013, and possibly complete it by the middle of next year.

"If I were to bet, I think there is a probability of more than 50 per cent that it will be done by then," he said.

But the two sides – Fiat and UAW – have been unable to agree on the value of the trust's shares.

UAW reportedly believes the stake to be worth more than $4bn and up to $5bn, a price that Fiat is unwilling to pay. While estimates vary, Fiat is said to be offering more than $1bn less than what the UAW is demanding for its stake.

The impasse led the UAW to exercise an option it retained during the bankruptcy: forcing Chrysler to float on the public markets, which Fiat opposes.

It is unclear how many shares would be sold, or at what price, but the proceeds would go exclusively to the UAW, which wants to demonstrate the value in Chrysler's stock as its sales climb.

Irked by the filing, Fiat has threatened to retreat from Chrysler, with the company saying in the paperwork that the Italian manufacturer had "informed us that it is reconsidering the benefits and costs of further expanding its relationship with us. This could include decisions on capital preservation and allocation, investments and locations of production facilities".

While the issue may yet be resolved through negotiations, the fact that there is an argument over Chrysler's value underscores just how far it has come since the bailout. Between April and June, the business recorded its eighth-consecutive quarter of profits as net income rose by 16 per cent to a shade over $500m. Quarterly revenues climbed by 7 per cent to $18bn.

The gains came against the backdrop of rising sales, as US car manufacturers make a comeback in an environment where interest rates remain lodged at record lows.

Over the second quarter of the year, Chrysler sold nearly 650,000 vehicles – up 10 per cent from 2012. August was the company's best month since 2007, with Chrysler selling 165,552 vehicles, up 12 per cent compared to the same month in 2012.

Among the key drivers of the company's revival has been the Jeep Grand Cherokee, produced at the Jefferson plant in Detroit.

Back on track: Car makers' bailout

In November 2008, Ford, General Motors and Chrysler, the "Big Three" American car makers, were struggling, forcing their respective chief executives to fly to Washington cap in hand seeking taxpayer support from Congress.

On previous occasions, these leaders of industry would have expected a warm reception.

This time, however, they were publicly lambasted on Capitol Hill for arriving in their corporate jets in a sign of just how far their stock – and the stock of their companies – had fallen.

"Couldn't you all have downgraded to first class, or jet-pooled, or something, to get here?" Gary Ackerman, a Democratic lawmaker, asked during Congressional hearing as the bosses pleaded for cash. "It would have at least sent a message that you do get it."

Eventually, in early 2009, following an early lifeline for Chrysler and GM approved by the Bush administration, President Barack Obama announced measures to support the industry. Nikhil kumar

Suggested Topics
News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
sportDidier Drogba returns to Chelsea on one-year deal
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
PROMOTED VIDEO
Sport
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
football
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Rhys Williams
commonwealth games
News
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
i100
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Travel
travel
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform