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TheStreet Open House

Chrysler Files For $100 Million IPO; US Automakers End Trading Mixed

NEW YORK (TheStreet) -- Well-known luxury carmaker Chrysler Group has filed a registration statement with the Securities and Exchange Commission for approval to publicly trade. Chrysler's retirement healthcare trust is seeking to float $100 million of shares.

Majority shareholder Fiat holds 58.5% ownership of Chrysler with the remaining portion held by healthcare fund VEBA, a trust affiliated with the United Auto Workers union. Fiat has attempted to purchase UAW's stake but negotiations turned contentious when neither side could agree on a final buy-out price.

Fiat/Chrysler CEO Sergio Marchionne told The Financial Times last week that a Chrysler float could happen as early as this year but would most likely take place in the first quarter of 2014.

The move to go public further complicates efforts to merge the two companies. On Friday, FIAT appointed Ron Bloom, vice chairman of advisory investment bank Lazard, to assist in negotiations.

For its fiscal second quarter, Chrysler reported net income of $507 million, a 16% increase from the year-ago quarter, and net revenue of $18 billion, up 7% from the same period last year. For full-year 2012, Chrysler sold 2.2 million vehicles worldwide, earning net revenue of $65.8 billion. The company employs more than 70,000 people.

It was a mixed day of trading for Chrysler's major US competitors. General Motors (GM) announced it will repurchase 120 million shares of its preferred stock from the UAW Retiree Medical Benefits Trust for around $3.2 billion or $27 per share. Moody's Investors Service upgraded General Motors from Ba1 to its grade rating of Baa3, citing new products, increasing dominance and a commitment to maintain liquidity as the prime factors.

Ford  (F) adjusted its European production schedule for the coming month on Friday, contributing to a lower share price in today's trading. Ford said it will halt production in Romania for 13 days in October to offset weak demand in Europe. Reuters reports more than half of Ford Romania's employees will receive 80% of their full wage during the halt in production. During September, Ford had a planned one-week stoppage for the same reason.

At the close of trading, General Motors shares were 0.81% higher at $37.13, while Ford shares suffered a 1.09% loss to $17.20. General Motors led and Ford lagged the S&P 500, which was down 0.47%.

TheStreet Ratings team rates General Motors a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: "We rate General Motors a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, General Motors' share price has jumped by 50.42%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $4,893.00 million or 24.12% when compared to the same quarter last year. In addition, General Motors has also modestly surpassed the industry average cash flow growth rate of 18.31%.
  • The debt-to-equity ratio is somewhat low, currently at 0.7, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.

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