US automaker Chrysler reluctantly filed papers for an initial public stock offering after Italian parent Fiat failed to reach a deal to purchase the stake of a workers' trust fund.
Sergio Marchionne, who leads both Chrysler and Fiat, had repeatedly said he hoped to avoid an IPO as he seeks full ownership of the third largest US automaker.
But the UAW Retiree Medical Benefits Trust -- known as the VEBA Trust -- has demanded a stock offering in hopes of getting a better payout.
The papers filed Monday may not necessarily result in an actual stock offering if the two sides are able to reach a deal before the shares are sold.
If the stock goes public, it will be the first time Chrysler shares were traded since its failed 1998 merger with Germany's Daimler Benz.
Chrysler said in a statement that the number of shares to be offered, and the price range for them, had yet to be determined.
"The VEBA Trust will receive all of the net proceeds from this offering," Chrysler said.
JP Morgan Securities was chosen as the lead book-running manager of the offering, and no time was set for the offer.
"The Chrysler IPO is a textbook example of the difficulties that can occur when debt is converted into an ownership stake, as it was during Chrysler's bankruptcy," said automotive analyst Jack Nerad of Kelly Blue Book.
"The trust is looking for a windfall based on the current expected value of a public-traded Chrysler, but the move may actually harm Chrysler's future and by extension harm current Chrysler workers."
Chrysler warned in securities filings that the IPO could threaten its relationship with Fiat -- and thus its viability.
"Fiat has stated that it believes a publicly-traded Chrysler Group will prevent or delay the full realization of the benefits of the Fiat-Chrysler Alliance," Chrysler warned prospective buyers.
"Fiat has informed us that it is reconsidering the benefits and costs of further expanding its relationship with us and the terms on which Fiat would continue the sharing of technology, vehicle architectures and platforms, distribution networks, production facilities and engineering and management resources."
Fiat currently holds a 58.5 percent ownership stake in Chrysler, while the VEBA trust holds the remaining 41.5 percent. However, under the terms of a deal reached as part of a 2009 government-funded bankruptcy filing, the VEBA trust is obligated to sell a large portion of that stake directly to Fiat.
The maximum proposed selling price listed in the filings was $100 million, just a fraction of the estimated value of the VEBA trust's stake.
The potential IPO comes as Chrysler's sales are booming after decades of turbulence and decline.
Chrysler's first big government bailout was in 1979 when legendary chief Lee Iacocca secured a loan guarantee.
Like fellow Detroit Three automakers General Motors and Ford, Chrysler shed tens of thousands of workers and scores of US factories in the 1980s and 1990s due to automation, a loss of market share to foreign competitors and the shift to cheaper production in Mexico.
The 1998 merger with Daimler was a colossal failure as the German automaker poured billions into its US partner before finally selling Chrysler to the private equity group Cerberus in 2007.
Cerberus did not have much chance of success once the 2008 financial crisis hit and auto sales collapsed to levels not seen in decades. Chrysler joined General Motors in seeking billions in aid from the US government and then restructuring under bankruptcy protection in 2009.
Fiat was able to win a 20 percent stake in Chrysler in exchange for sharing its technology and putting Marchionne at the helm.
Marchionne led a drastic revamp of Chrysler's product offerings and management structure that has fueled 41 consecutive months of sales gains in the United States.
Chrysler's profits rose 16 percent to $507 million in the second quarter, with global vehicle sales up 10 percent at 643,000.
Those profits have been keeping Fiat in the black amidst a deep downturn in Europe and Marchionne has been steadily expanding Fiat's stake in Chrysler.
His goal is to create a global player with the capital and volume to compete with the likes of Toyota and General Motors.