Chrysler Files for IPO, GM Plans to Buy Back Stock

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Chrysler Group and General Motors Co. were both active in terms of stock offerings Monday, although the cause and possible effect may differ for each automaker.

For Chrysler, the automaker filed for an initial public offering after receiving a registration demand from the UAW Retiree Medical Benefits Trust at the beginning of the year. How this will affect the automaker’s relationship with Fiat is unclear, but judging by the language used in registration statement it filed with the U.S. Securities and Exchange Commission, it doesn’t look good.

According to the document, Fiat has informed Chrysler that it is evaluating the various impacts a public offering and stockholders may have on its view of the Fiat-Chrysler Alliance and is unsure of whether or not it will continue expanding the partnership beyond its existing commitments.

As the registration statement notes: “If Fiat becomes unwilling to work with us beyond the scope of its existing contractual obligations, there may be a material adverse effect on our business prospects, financial condition, and results of operations.”

The Fiat-Chrysler Alliance is intended to provide Chrysler with a number of long-term benefits, including access to new vehicle platforms and powertrain technologies —particularly smaller, more fuel-efficient segments where the automaker has not had a significant presence before. The alliance would also provide Chrysler with procurement benefits, management services, and global distribution opportunities.

In contrast, GM’s activities on Monday seem to allude to a positive outlook for the company’s future as the automaker announced its plans to repurchase 120 million shares of preferred stock from the UAW Retiree Medical Benefits Trust for approximately $3.2 billion.

In order to buy back the stock, the automaker must first close its offering of senior notes, which it launched Monday, on or before Sept. 30. The net proceeds of the offering will be used for general corporate purposes, including the aforementioned stock purchase.

This announcement was followed by another noting that General Motors Co. has been moved to an investment grade rating by Moody’s Investors Services in New York.

Moody’s says the move to a Baa3 from a Ba1 rating reflects its expectation that GM’s competitive position and credit metrics will continue to improve based on the strength of the company’s new product introductions in a healthy U.S. market, its solid position in the increasingly important Chinese auto market, and its focus on maintaining a robust liquidity profile. 

“Good things happen when you build great cars and trucks and deliver strong financial results,” Dan Akerson, GM chairman and CEO, said in a statement. “(This rating’s increase) further underscores that this is exactly what we are doing today.”

In other GM news, Cadillac is set to reveal the 2015 Escalade luxury SUV on Oct. 7. Indie rock photographer and director Autumn de Wilde produced a series of portraits and a film highlighting the new model’s design process.

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