Delaware Judge Donald Parsons has ruled that Fiat cannot set a price of $139.7 million for each 54,000 shares of Chrysler, but he also did not agree with the United Auto Workers' valuation of the stock.
The ruling means that Fiat and the UAW will have to negotiate to determine the cost of the remaining 41.5% of Chrysler stock, which accounts for 270,000 shares. Fiat has the option to appeal the ruling, but it will send the measure to trial and further delay a decision.
The dispute before the judge was whether Fiat could set the price of Chrysler stock. Fiat claimed that each 3.3% segment of Chrysler stock should be worth $139.7 million. That price was based on Chrysler's value when Fiat bought half the company in 2009. The UAW argued that the value of the stock should be what the company is worth now, which it estimated at around $342 million for each 3.3% segment. However, the judge also disagreed with the way that the UAW calculated the stock's value because it did not factor in the company's debt correctly.
"The value of this dispute potentially could exceed a billion dollars," said Judge Parsons.
He also refused to rule on some of the disputes that both sides had because neither side had provided enough information.
"Discovery is necessary to determine the correct way to calculate or interpret the other items in dispute," said the judge.
Fiat is able to purchase up to 75% of Chrysler from the UAW and will have to negotiate for the cost of the rest of the stock. Chrysler and Fiat CEO Sergio Marchionne says that the company is "not close" with the union on a price for the stock.
In preparation for this ruling, Fiat has reportedly made deals with several banks for loans to buy the rest of Chrysler, pay off its loans and refinance the debt.
Source: Automotive News
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