Italy's Fiat owns 58.5% of Chrysler and had wanted to buy the remaining stake, which is held by the United Auto Workers (UAW) Retiree Medical Benefits Trust. The two sides have negotiated for months but failed to reach an agreement. The UAW's retiree healthcare trust has not disclosed how much it wants for its 41.5% stake, which it gained as part of the US's government's bailout of the company.
Should the IPO go ahead, this will be the first time since 1998 that all three Detroit auto firms will be publicly traded companies on the US stock markets. Chrysler and General Motors both filed for bankruptcy in 2009 as the recession brought their already struggling businesses to the point of collapse. GM conducted an IPO in November 2010.
Sales have been surging at Chrysler, which is the third-biggest American carmaker after General Motors and Ford. The recovery in the housing market and construction have boosted truck sales and new vehicles have attracted more confident consumers. In the second quarter its profits rose 16% to $507m. Chrysler has reported full-year profits for the last two years.
The company's earnings have been a boost Fiat, which has been struggling with the continuing aftermath of the financial crisis in the European market. An IPO would be a blow to Sergio Marchionne, chief executive of both Fiat and Chrysler. Marchionne has overseen a remarkable turnaround in the US company and had been keen to take full control.
Fiat was allowed to take control of Chrysler in 2009, in return for a pledge to develop and build fuel-efficient cars in the US. The deal does not give Fiat access to Chrysler's cash, an issue that would be resolved if Marchionne is able to merge the two firms.
The IPO could be derailed if Marchionne can restart negotiations with the UAW. "Fiat remains available to continue the discussion," he told analysts after the second-quarter earnings. He has previously said he would IPO a joint company on the US stock markets.
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