Fiat, Auto Worker Fund Clash in Court Over Chrysler Call

Fiat SpA (F), the majority owner of U.S. automaker Chrysler Group LLC, may have to pay more than its $139.7 million offer in a call option for shares being bought from the United Auto Workers’ retiree health-care trust, a judge suggested in court today.

Fiat, based in Turin, Italy, is increasing its stake in Chrysler and is asking Delaware Chancery Court Judge Donald Parsons Jr. to help determine the value of the 54,154 Chrysler units, which the trust contends are worth least $342 million.

“I’m kind of leaning” in the direction of the trust, Parsons told lawyers at the hearing in Wilmington, and said he’d take the case under advisement.

He told trust lawyers that “the dog that won’t hunt” in the case is the argument that the units should be sold at current fair market value, and said he may have to retain an accountant to examine the complex valuation formula in the 2009 call-option agreement.

“We don’t say we’re entitled to fair market value,” said lawyer Robert W. Hirth, representing the trust. He said the current offer “is so far below” fair value that it represents a lack of good faith.

Amid reported confusion about numbers in the valuation formula, Parsons told Fiat lawyer Steven L. Holley that observers “ought to be able to follow what you did” in the calculations. “If they can’t, I can’t,” Parsons said.

Accounting Variations

Holley also told the judge that Fiat uses IFRS, or international financial reporting standards, while the trust uses GAAP, or generally accepted accounting principles, in their calculations for elements of the valuation formula.

“I’m not going to grant the motion” in Fiat’s favor amid the uncertainties requiring resolution, Parsons said. He didn’t say when he’d render a decision in the case.

Fiat North America LLC sued the UAW Retiree Medical Benefits Trust, a Chrysler investor, in 2012, alleging the trust violated the agreement allowing Fiat to buy units incrementally through June 2016.

Fiat Chief Executive Officer Sergio Marchionne is awaiting the court decision on the price of the stake before going ahead with his plan to buy the remaining 38.5 percent stake in Chrysler and merge the two carmakers. Marchionne expects the Delaware court to make its ruling by the end of June and to have “clarity” about the combination of the two carmakers by the end of the year, he said April 9.

The case is Fiat North America LLC v. UAW Retiree Medical Benefits Trust, 7903, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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