Chrysler's plan for a public stock offering would ordinarily be cause to celebrate the automaker's comeback from its government bailout and bankruptcy in 2009. But the company's filing for the offering is hardly a moment of triumph.
Chrysler is taking the step only under pressure from its second-largest shareholder, a trust set up to provide medical coverage for 115,000 retired auto workers and family members.
And while the offering would generate needed cash for the trust, it would also thwart plans by Fiat, Chrysler's Italian parent, to acquire full ownership of the American automaker.
The Detroit automakers have large financial responsibilities to their retirees. On Monday, General Motors said it would raise money in the bond market to buy preferred stock in the company owned by its retiree healthcare trust at a cost of $US3.2 billion.
Chrysler's offering arises from an unusual conflict of interests, made possible by the remarkable turnaround at Chrysler since it was shepherded through bankruptcy four years ago by the US federal government.
The United Auto Workers healthcare trust has the legal right to cash in a big chunk of its stake in Chrysler, which today stands at 41.5 per cent and is a legacy of a deal brokered in 2009 by the Obama administration's auto taskforce. At the time, the deal was seen as a last-ditch effort to save the faltering automaker, while also preserving labour peace with the UAW.
Now, with profits flowing again and the trust in need of cash, it has formally requested that Chrysler register for a public offering covering about 16 per cent of the company's overall shares. The offering is another sign of how Chrysler - as well as General Motors - has recovered since the bailout. In the case of GM, the US Treasury Department is continuing to sell off its ownership position, and now owns less than 8 per cent of the company's stock.
The offering, however, is not supported by Sergio Marchionne, the chief executive of both Fiat and Chrysler and the architect of the American company's revival.
Mr Marchionne is eager to merge the two companies into one international auto giant. And to do so, he needs to acquire the trust's 41.5 per cent stake.
But there is a wide gap between what Fiat wants to pay for the shares, and what the trust's administrators believe they are worth. After months of unsuccessful negotiations, the trust wants to establish the shares' value in the sharemarket - and reap a windfall for a portion of its stake.
"It's a very, very high-stakes battle going on here," said Harley Shaiken, a labour professor at the University of California-Berkeley. "Both sides are being quite strategic, and we'll see how it plays out."
Officials for the trust - known as a Voluntary Employees Beneficiary Association - have declined to comment on the possible stock offering.
Some industry analysts view the trust's request for the stock offering as a negotiating tactic intended to force Fiat to pay a premium price for all its shares.
In an ongoing court case about the valuation, Fiat has said the trust's stake is worth about $US3 billion. But the trust wants considerably more than that.
"The union took a very high risk when it accepted shares in a bankrupt company four years ago to cover healthcare for retirees," Professor Shaiken said. "Now they want to share in Chrysler's success."
Chrysler, the third-biggest American carmaker after General Motors and Ford, has been surging the past two years. Its sales have increased on the strength of new products such as the revamped Jeep Grand Cherokee sport utility. In the second quarter, its profits rose 16 per cent, to $US507 million.
Its earnings have been a bright spot for Fiat, which has been struggling with weak demand for new vehicles in its core European market.
Fiat already owns 58.5 per cent of Chrysler's shares, giving it undisputed control of the American firm. A limited stock offering would not change that.
But if Fiat could gain 100 per cent ownership, it could then tap into Chrysler's hefty cash reserves, integrate its operations, and cut overall costs.
Mr Marchionne has not closed the door on further talks between Fiat and the trust over buying its entire stake. "Fiat remains available to continue the discussion," he told analysts after the second-quarter earnings.
The trust, however, is not waiting for more negotiations. By requesting the stock offering, it could shore up its finances with more than $US1 billion in cash to pay for medical costs of retirees.