[Allpar News System]

Judge Donald Parsons rejected Fiat’s argument that a tranche of 54,000 shares was worth $140 million, in a 448 page decision in which he also refused to order the only non-Fiat owner of Chrysler shares to sell them for what is now a bargain price. Fiat was, according to a 2009 agreement, entitled to buy several “tranches” (collections of shares) of Chrysler stock from the union pension/health benefits fund, which relies on the income to provide benefits to retirees. The “defined benefit” pensions were originally considered to be part of employees’ salaries, with the advantage of being essentially untaxed. Fiat argued that the shares had been set at $140 million, but the judge stated earlier that he found the formulas highly complex and confusing, and that Fiat’s argument was not as clear as the company said. The 2009 pricing agreement only covers 40% of the trust’s holdings; the rest would..

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[freshforged]

good--the workers deserve a fair price for their shares.

 

[superduckie5000]

The Report From Automotive News:

http://europe.autonews.com/apps/pbcs.dll/article?AID=/20130731/ANE/130739978/u-s-court-ruling-could-delay-fiats-chrysler-buyout&cciid=email-ane-daily&r=3771D6126356D8M#axzz2aUYnNavx

TMD

 

[MoparNorm]

good--the workers deserve a fair price for their shares.

The VEBA deserves market share for 60% of the shares they own, these 40% are to be valued at the predetermined price set forth by the formula.
Apparently the judge was not smart enough to do the math and this is just another delay that harms both VEBA and Chrysler.

 

[RVC]

That's an interesting interpretation of the "decision" by the Judge. According to what I read, basically the judge said FIAT was right on its understanding of the formula to calculate the price and the inclusion of promissory notes.
Basically the point on which the Judge decided to not decide again, is the specific issue of ordering VEBA to give FIAT the shares (obviously at the price FIAT has calculated according to the formula). This sort of wish-wash attitude by the judge is ridiculous and exemplary of why this country is falling behind.

In his words as reported by the press: “I find that Fiat’s interpretation reflect the only reasonable interpretations of the contract in issue,” Delaware Chancery Judge Donald Parsons said in a ruling Tuesday. "Fiat has not yet demonstrated that the VEBA (trust) is required to deliver the 54,154 shares in return for Fiat’s payment of $139.7 million.”

"Required" being the operative word; basically - now that price as calculated by FIAT has been cleared as correct - they [FIAT] also have to prove that VEBA is obliged to sell the shares. I really don't see how that is elective as spelled out in the agreement, but that's what Mr judge decided to go with.

http://www.freep.com/article/20130730/BUSINESS/307300162/Judge-rules-Fiat-Chrysler-share-price-suit-Chrysler-2Q-profit-up
http://www.reuters.com/article/2013/07/30/us-fiat-veba-delaware-idUSBRE96T1CS20130730

Let's see if VEBA will now do the right thing and move forward, or play some obstructionist game. The longer they drag this out, the worse it is for Chrysler. If FIAT has to pay more than what the agreement stipulated, they will do so, but then immediately take that difference out of the cash pile Chrysler has accumulated after it reaches its 70%+ level.

It would be a stupid game for VEBA to be playing at this point, given that the crucial price issue has been cleared in favor of FIAT.

 

[dfarc]

Part of the problem is the complex nature of the calculations, which the judge stated. If it avoids any sour feelings, its probably best for both, indicating more value for Chrysler when it does go public!

 

[dana44]

I don't know where the law says a person has to sell a tranche of shares, so that part of the decision is correct. At the same time, nothing says VEBA has to be bought out. Why does Fiat have to own everything to continue and move forward with anything? If it is truly a merger, this should not matter at all. Refinancing is one thing, having to own the company outright is another.

 

[RVC]

I don't know where the law says a person has to sell a tranche of shares, so that part of the decision is correct. At the same time, nothing says VEBA has to be bought out. Why does Fiat have to own everything to continue and move forward with anything? If it is truly a merger, this should not matter at all. Refinancing is one thing, having to own the company outright is another.

The Law per se doesn't say that, it's the Agreement that the parties signed that says that the Judge just decided that he didn't want to be the one to enforce that, so he passed the ball on to the next guy. His idea is that since a proper court procedure lasts at least 12-18mo. the two parties will try to reach an out of court agreement in the meantime.

Besides that, it's not a M&A-style merger, FIAT is simply buying out Chrysler; what it's doing is merging the two companies. The idea has always been to buy out the totality or quasi-totality of Chrysler, to merge it with FIAT and create a new entity.

Finally, VEBA needs to sell those shares because it needs cash. It's just that as Chrysler's balance sheets have greatly improved, it decided hat it wanted more money for them that the agreement stipulated. The judge just said that's not the case.

 

[jerseyjoe]

My personal feeling is good for the employees. Chrysler got shafted when the Supreme Court Decides in the Daimler era that the company belonged to Daimler and they could do what they want with it. I don;t see selling the remaining shares will help North Americans as much as it will assist off shore interests. As it is right now Fiat has controlling and can set the direction of the company as it pleases. Giving up the rest will only assist over seas management bonuses. I personally don;t like the fact that an American company was handed over to a foreign entity AGAIN.

That said I have no ill will towards Fiat and appreciate their struggle. I hope this issue can be settled benefit both sides. It is a team effort after all.

 

[Dave Z]

With jerseyjoe on this one.

 

[dana44]

Which is my point, too, so I agree. I don't see any way the current owners/investors (VEBA) has any real input to what happens with operations or product, they are simply stockholders, VEBA pays the retirees with their profits (from what I understand), so in reality, if both Fiat and VEBA were to secure lower interest loans and pay off what is owed, wouldn't that benefit both parties? As much as I disagree with the bankruptcy layout, Fiat did get the deal of the century, work with what they got, don't get too greedy, improve what they have and leave it at that.

 

[AlfaCuda]

If the agreement was signed by both parties (obviously in agreement of the agreed price) then I don't see the point of a dispute. In that case if Chrysler did badly under Fiat then Fiat can go to a lower price than what was agreed?? I'm quite sure VEBA would have wanted to stick to the agreed price then...

The judge just does not want to make an unpopular decision?

 

[Dave Z]

Perhaps there's something we don't know. Judges do often tend to ignore the law and contracts and such but this judge does have a pretty good reputation. It would not be a 448 page decision if it was so cut and dried...?

I agree that Chrysler and Fiat can integrate their operations pretty effectively without full ownership, though there are some limits that were apparently set on what could be done. If Fiat was run as DaimlerChrysler was run, of course, Sergio could do whatever he wanted and find sneaky ways around it -- for example, charge massive consulting and royalty fees (unless this was specifically forbidden!).

 

[dana44]

Agree, but that was a mismanagement/sell problem, this bankruptcy simply says Fiat can't suck the life out of Chrysler, or use Chrysler money for Fiat. That doesn't change anything when it comes to integrating the two with components.You make a bracket, both entities use it, it's just parts availability and usefulness, a way to save money overall, and aid in both entities becoming successful. There isn't a way VEBA can buy out Fiat and take over the whole company, and vice versa from the sounds of it, so go for it, make both entities thrive and simply work together to get the high interest loans taken care of, both parties have an even stake in becoming more independent from them.

 

[sebring96hbg]

There is a 51 page legal opinion on this. VEBA is asserting that before the shares may be transferred, the conditions under a Department of Labor exemption to ERISA must be satisfied first. That said, the state court judge has noted that this has not been fully briefed for him since the parties seem to impliedly recognize that only the federal district court has jurisdiction to resolve the issue, meaning that the state court lacks subject matter jurisdiction over the exemption issue. The state court judge can mete out the price but may ultimately be unable to have legal authority to direct the delivery of shares. The latter may be within the province of the federal district court.

 

[Dave Z]

Thank you, Joe. That clarifies matters. So rather than being angry at the judge, we should appreciate his understanding his boundaries... something some judges don't get.

 

[PCRMike]

Amen Dave.

 

[RVC]

There is a 51 page legal opinion on this. VEBA is asserting that before the shares may be transferred, the conditions under a Department of Labor exemption to ERISA must be satisfied first.

Precisely the point. Right now for VEBA to be insisting on that point would be equivalent to simply saying; "yes, I accept that the judge said FIAT's valuation of the shares was the right one; yes, I accept that promissory notes could be included in the formula calculations; BUT, I'm still clinging on to my shares by claiming far fetched ERISA implication as another way to strong arm a better price than the one I agreed to when the company was worth less than zero."

Dana44, what you say could work on a strictly operational level (it already does), but keeping two separate structures for what is essentially already one entity (operatively speaking) creates a comparatively inordinate amount of inefficiencies and overhead on an administrative level. It also excludes you from better loan conditions. It also precludes comparable access to global capital markets.

In other words, ain't no way FIAT is not merging the two companies, it would be unthinkable to have done all they have done to not reach the end goal.

Dave, the judge took a year to come up with this...his behaviours is nothing but reproachable, as far as I'm concerned.

 

[sebring96hbg]

Oral argument was held on April 25, 2013. The judge rendered his decision in about 90 days.

 

[dana44]

Chrysler has been an American company for its whole life. Fiat owning the whole company is the only thing that prevents me from leaving this or any other Mopar site. Don't keep the American arm on my behalf, but don't tell me going global means Chrysler has to dissolve or be owned by a foreign entity to survive. It would simply prove this administration is into destroying this country one way or another, we are just too good and all that to have three major car companies and it isn't fair to the rest of the world so we have to give it away.