Chrysler IPO Still Slated for Next Year
Nov 17th 2010 6:35AM
Updated Nov 17th 2010 6:39AM
Chrysler CEO Sergio Marchionne, who also runs Fiat, says the No. 3 U.S. car company will probably launch an initial public offering in late 2011, according to several reports.
Chrysler's obligations to the U.S. and Canadian governments are only $7.4 billion -- much smaller than General Motors'. But the interest rates that Chrysler pays for U.S. loans are close to 14%, according to Bloomberg, so the reasons for an IPO to cut debt service are obvious.
However, the road to a public offering could be bumpy as Chrysler faces some issues that GM does not. The first of which is that Chrysler still loses money. It had a loss of $84 million in the third quarter.
And losses are not the end of it. Chrysler does not expect to launch a new model line until next year -- at the earliest. That leaves it two years behind GM and almost four years behind Ford (F). Chrysler has only 10% of the domestic market -- in a good month. And, it must deal with a number of larger rivals from the U.S., Japan, and Korea. For example, as Chrysler has stumbled, Korean firm Hyundai has pushed its American market share to over 5% and sales of its value-oriented vehicles continues to surge.
One of the tremendous advantages GM can boast about on its IPO roadshow is that it is the market-share leader, along with VW, for car sales in China, now the world's largest market. Chrysler has almost no presence there, nor does it have a large operation in Europe, as GM and Ford do.
Chrysler is pinched in its home market and does not have a real business outside the U.S. That makes an IPO difficult, if one can be pulled off at all.