Chrysler Group is focused on raising new financing to pay back almost $7 billion it owes to the U.S. and Canadian governments before an initial public offering of shares, Chief Executive Sergio Marchionne said on Wednesday.
"Our priority is to put in place a structure where Chrysler would become answerable to the capital markets only," Marchionne said at a meeting with financial analysts organized by Deutsche Bank.
"The most likely of the options under consideration is a financing package that would facilitate payment of all government debt prior to an IPO."
Chrysler, which was put under the management control of Fiat SpA (FIA.MI) in a 2009 bankruptcy brokered by the Obama administration, owed $5.7 billion to the U.S. Treasury and $1.2 billion to Canada as of the end of September.
Marchionne said the cost of financing that debt had kept the No. 3 automaker from posting a profit for 2010 on sales of about 1.6 million vehicles.
Instead, it broke even, Marchionne said. Chrysler will not report full fourth-quarter results until January 31.
Chrysler has been in discussions with Goldman Sachs (GS.N) and other banks but has not made a decision yet on which will lead its IPO and refinancing, Marchionne said.
In its first full-year under Fiat, Chrysler made more progress in reducing costs, Marchionne said.
A Fiat system for manufacturing that was rolled out in Chrysler plants starting with the Detroit plant which makes the new Jeep Grand Cherokee produced savings of more than $200 million, he said.
The cost savings means that the new Chrysler could break even if the U.S. industry sees annual sales as low as 10.5 million vehicles, even below the 2009 crisis levels that prompted its bankruptcy, Marchionne said.
IPO COULD COME AS EARLY AS Q3
Chrysler's U.S. market share recovered to 9.2 percent in 2010 from a low of 7 percent in 2009 even though the only new product it had was the new Jeep that arrived late in the year.
Marchionne, who spoke briefly to reporters after his presentation to analysts, said the IPO could come as early as the third quarter of 2011.
A final decision on timing would depend on the strength of financial markets and the judgment of Chrysler's board, he said.
Chrysler's restructuring differed from the bailout for GM in that the U.S. Treasury converted less of its financial assistance to equity at Chrysler and kept more debt on its balance sheet.
GM launched its IPO in November, raising a record $20 billion and reducing the U.S. government stake in the top automaker to about 33 percent.
"Had we been treated like another car company in town, which received most of its assistance in the form of equity, we would have been able to report a net profit for 2010," Marchionne said.
Fiat holds 25 percent of Chrysler as of this week after meeting a promise to the U.S. government to produce a more fuel-efficient, Fiat-designed engine at a U.S. plant for Chrysler.
On a diluted basis, the U.S. Treasury holds 8 percent of Chrysler stock, the Canadian government holds 2 percent and 55 percent is held by a trust fund for retiree healthcare affiliated by the United Auto Workers.
