Fiat Chief Rolls Dice on Market and Chrysler Merger

Since then, Mr. Marchionne has impressed the automotive world by resurrecting Chrysler from bankruptcy and driving it toward a merger with Fiat.

But now those negotiating skills are being tested by the United Automobile Workers retiree health care trust — and his plans for a Fiat-Chrysler merger hang in the balance. Mr. Marchionne yielded to pressure from the U.A.W. trust on Monday when Chrysler registered for a public stock offering. The trust is eager to sell off a portion of its 41.5 percent ownership stake in America’s third-biggest automaker.

The decision to go public came after talks stalled between Fiat and the trust to purchase the trust’s entire Chrysler stake. The trust’s administrators didn’t like Fiat’s offer, and wanted to go directly to the stock market to sell a portion of its shares.

Now Mr. Marchionne is gambling that the open market will set a price for Chrysler’s shares that will prompt the U.A.W. trust to turn back to Fiat for a better deal.

It’s an aggressive strategy on Mr. Marchionne’s part, and one in keeping with his unconventional approach to running car companies.

This is an executive who made “Imported from Detroit” a successful sales pitch for a bankrupt automaker and rebuilt Chrysler’s market share by emphasizing rugged Jeeps and pickups rather than fuel-sipping compact cars.

Industry analysts who were once baffled by Mr. Marchionne’s vision now respect it, and think he has turned the tables on the U.A.W. trust by agreeing to pursue a stock offering.

“I think he owns the high ground here and the U.A.W. knows it,” said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich. “The offering is going to determine a value for Chrysler, and there will be no arguing about it.”

Mr. Marchionne said as much this year during negotiations between Fiat and the union trust, also known as a Voluntary Employee Beneficiary Association.

“I’m hopeful that we’ll find a solution for V.E.B.A. that meets our needs and theirs,” he said in a conference call with analysts in April. “But it needs to be market-relevant. It’s not a matter of feeding into expectations that aren’t real.”

Fiat is believed to have offered the U.A.W. trust about $3 billion for its 41.5 percent stake in Chrysler. If the stock offering is priced at a higher per-share value, Fiat may relent and offer more.

But if the stock offering goes to market at a lower valuation, the trust could be accused of leaving a better offer from Fiat on the table.

That would not appeal to the 115,000 Chrysler retirees and family members who depend on the trust to pay their medical bills.

The stock offering could scuttle efforts to knit Fiat and Chrysler into one consolidated, international automaker that can better compete with rivals like Volkswagen and Toyota.

“The trust is looking for a windfall based on the current expected value of a publicly traded Chrysler,” said Jack Nerad, an analyst with the auto research firm Kelley Blue Book. “But the move may actually harm Chrysler’s future and by extension harm current Chrysler workers.”

In its registration papers for the public offering, Chrysler said that the stock sale could prompt Fiat to reconsider its entire relationship with the American automaker.

Fiat now owns 58.5 percent of Chrysler and the two companies collaborate on new vehicles, engines and parts purchasing.

But in Mr. Marchionne’s view, Fiat needs to own 100 percent of Chrysler to fully realize their combined potential. That can be accomplished only if the U.A.W. trust backs off its demand for a public offering and sells out to Fiat.

Either way, analysts are skeptical that Fiat would ever walk away from Chrysler.

“Fiat has to have a partner to survive,” Mr. Cole said. “It needs Chrysler more every day.”

Fiat, which is especially dependent on its struggling home market of Italy, would have lost money so far this year without the profits it has earned directly from Chrysler. Besides pumping up Fiat’s earnings, Chrysler is helping the Italian automaker re-establish itself in the American market with new products like the Fiat 500 minicar.

Chrysler has also allowed Fiat to spread the cost of buying components among a greater number of models, which Mr. Marchionne has often argued is crucial for mass-market carmakers to be profitable. The 2013 Dodge Dart, for example, is based on the Giulietta compact made by Fiat’s Alfa-Romeo unit.

Mr. Marchionne has been conspicuously absent recently from public events like the Frankfurt auto show — an unusual move for an executive who routinely holds hourlong media briefings at such events.

Even his closest aides were unable to explain why he had skipped the show, leading to speculation that Mr. Marchionne was in the final stages of cutting a deal with the U.A.W. trust.

But Mr. Marchionne was quietly preparing for the stunning public offering announcement. And in typical fashion, he is keeping the U.A.W. trust — and the entire industry — guessing about his next move.

“No question, this guy is one tough bargainer,” Mr. Cole said. “His reputation is well deserved.”

Jack Ewing contributed reporting from Frankfurt.