Another reason for Chrysler’s late IPO – a tax issue image

According to a couple of people with knowledge of the matter, Chrysler’s initial public offering was delayed after the automaker wasn’t able to resolve a routine tax issue quickly enough to complete the sale this year.

Chrysler needs a letter from the U.S. Internal Revenue Service to clarify tax liabilities after the IPO, said the people, who asked not to be identified because the matter is private. It hasn’t obtained that and didn’t want to proceed without it, they said. Bank advisers were considering a valuation of about $10 billion for Chrysler, people with knowledge of the matter said last week.

This is why Fiat announced yesterday in a statement that the IPO would not go through in 2013, as Chrysler’s board determined after speaking with the carmaker’s underwriters that a share sale in 2013 is no longer feasible.

Sergio Marchionne, CEO of both carmakers, has been working to combine Chrysler with Fiat, which took control of the U.S. automaker as part of its 2009 bankruptcy. A UAW retiree medical trust and Fiat are disputing the company’s value as Marchionne seeks to buy the union fund’s 41.5% stake. The trust is working to determine whether to sell its holding to Fiat directly or press forward with an IPO.

The $10-billion valuation was on the low end of a range from $9 billion to $16 billion, that would make the UAW trust’s stake worth $4.15 billion, less than what analysts have expected Fiat to pay.

Marchionne has offered the trust at least $1 billion less than what the labor group is asking and said the UAW “should buy a ticket for the lottery” if it wants $5 billion or more.