UAW Medical Trust Says Chrysler Value Rose 33% Last Year
The trust representing UAW retirees from Chrysler said the value of the automaker rose by a third in 2012, bolstering the health-care fund for former workers.
The UAW Chrysler Health Care Trust said its stake in Chrysler rose in value by 33 percent to $3.6 billion last year, when the Auburn Hills, Michigan-based automaker continued to gain market share in the U.S. while making money in each quarter. Profitable sales gains have continued this year while Fiat SpA (F) haggles with the trust over the price it must pay to merge with Chrysler.
While the union trust argues that the value of the stake has continued to rise, Sergio Marchionne, chief executive officer of Chrysler and majority owner Fiat, has challenged those valuations, calling them too high. To break the standoff, Fiat filed for an initial public offering of Chrysler shares last month at the behest of the trust.
“The trust has to optimize this because they’re getting all they’re going to get and they have to support the health-care needs of a growing retirement base,” Richard Hilgert, an analyst with Morningstar Inc. (MORN) in Chicago, said yesterday in an interview. “They’re being good stewards of what they have to manage. They have to maximize the value.”
Marchionne valued the trust’s 41.5 percent stake at $1.7 billion in July, when the trust said it was worth $4.2 billion. The trust, organized as voluntary employee beneficiary plan, or VEBA, said the value rose from about $2.7 billion at the start of last year.
Health-care trusts for retirees from General Motors Co. (GM) and Ford Motor Co. (F) also reported increases in net assets, a reversal after the three funds showed losses for 2011. Chrysler’s VEBA lost $733.6 million that year, and last year its liabilities more than doubled to $349.6 million.
The Chrysler trust’s net assets grew by 18 percent in 2012 to $10.3 billion, according to its 2012 financial statement, filed Oct. 11. Almost $900 million of the gain resulted from an increase in the value it placed on its Chrysler stake. Expenditures for benefits rose less than 0.1 percent to $631.1 million.
Matt Wood, a spokesman for the trust, and Katie Merx, a Chrysler spokeswoman, declined to comment on the filing.
Fiat gained 0.2 percent to 6.41 euros at the close in Milan yesterday.
The trust received its stake in Auburn Hills, Michigan-based Chrysler as part of the automaker’s 2009 bankruptcy to help pay for the medical benefits of Chrysler’s union retirees. The trust covered the medical benefits for 61,214 people at the end of 2012, according to its 2012 financial statement.
While Fiat has the right to buy the stake for about $6 billion, Marchionne wants to pay less. He said last month the trust “should buy a ticket for the lottery” if it wants $5 billion or more for its holding.
Chrysler’s value has climbed to $13.5 billion, UBS AG estimates, as industry wide U.S. light-vehicle sales this year are on track to reach the best level since 2007. The UBS estimate would mean the VEBA’s stake is worth $5.6 billion.
Chrysler deliveries in the U.S. have risen for 3 1/2 years as its added nameplates such as the Dodge Dart and Fiat 500 while revamping its Ram pickups and Jeep Grand Cherokee and Dodge Durango sport-utility vehicles.
The GM UAW retiree health-care trust ended 2012 with almost $30 billion in net assets, 5.8 percent increase from the beginning of the year, according to records filed with the U.S. Department of Labor on Oct. 11. The trust completed 2012 with a net income of $1.65 billion compared with a $4.7 billion loss in 2011.
In September, Detroit-based GM said it plans to buy back almost half of the trust’s preferred shares in the automaker for $3.2 billion.
The Ford UAW retiree health care trust ended 2012 with $15.9 billion in net assets, a 5.4 percent increase from the beginning of the year, according to its filing. The trust ended the year with net income of $806.8 million compared with a $973 million loss in 2011.
The three VEBAs have a combined $58.8 billion in assets. They spent a total of $4.16 billion on medical benefits last year and paid administrative fees totaling almost $284 million. The GM VEBA paid $2.48 billion in benefits and reported $170 million in administrative expenses.
The Ford VEBA paid $1.05 billion in benefits and $75.8 million in administrative expenses. The Chrysler trust’s administrative expenses were $38 million.
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