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Chrysler IPO? Not Now. Ferrari IPO? Maybe...

Do not even try to figure me out.
Right now, it looks very much as if Chrysler will not be following General Motors (GM) back into the public markets any time soon. An IPO was initially discussed as a possibility for late 2011 or early 2012, but there's a distinct chance it won't even happen next year. The reasons are complex, but Fiat-Chrysler CEO Sergio Marchionne isn't in a rush. Even though there are plenty of players in the worlds of carmaking and finance who would like him to be.

Nothing here is easy
Marchionne is a genius at making everything sound simple while reserving the right to make everything seem enormously complicated. It's his unique brand of management jiujitsu, designed to simultaneously screw with the media (so he can control the story) and to keep his bankers and potential bankers off balance (so that he doesn't get pushed into anything).

All he'll say on the Chrysler IPO right now is that "the market isn't there." Tell that to LinkedIn (LNKD) and Pandora (P) and any of the numerous companies that have or hope to launch IPOs while the launching is good. They don't think the market stinks, not do their underwriters.

Marchionne doesn't play that game, however. Nor does he have to. He's methodically marched Fiat into a majority ownership stake in Chrysler. It assumed 52 percent of the company by refinancing the U.S. government's multi-billion dollar equity position, then ponying up $500 million to capture a final 6 percent.

This leaves only the auto workers union, which holds almost all of the rest of Chrysler, alongside the Canadian government and its relatively minor stake for Fiat to deal with if it hopes to assume almost full control of Motown's smallest carmaker.

Controlling the timing
Marchionne has the option of buying the UAW and Canadian positions, or of going public with Fiat's existing stake. The problem, as Bloomberg reported on Wednesday, is that gobbling up all of Chrysler would damage Fiat's ability to get itself back to investment-grade bond status.
If this were a chess match, Marchionne would be in the precarious position of getting ready for his endgame, making the right sacrifices while preserving his pawn structure. The challenge, however, is that Fiat has done this deal all along without exposing itself to major risk or putting its own money at stake. It's as if Marchionne started with only one rook, knight, and bishop, instead of two of each.

He really needs to do something bold, given that a Chrysler IPO now would neither generate the market value he's seeking, nor provide Fiat with a sufficient pay out. Delaying, however, mean that the UAW stake will cost him more.

The solution is to do a Ferrari IPO, something the market is salivating over. While the situation might not be great right now to bring Chrysler public, Ferrari would command top dollar. It's Fiat's most profitable unit and could be worth as much as $7 billion. That kind of coin would go a long way toward mitigating the risk that Fiat confronts as it works to move the UAW out of the picture.

Happy Money
So as much as stalling the Chrysler IPO may disappoint the investment banks that want to underwrite the issue, a Ferrari IPO could more than make up for it. It's Fiat's safety valve. And it could be the next chapter in the crazy story of Chrysler's revival.

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Photo: Fiat-Chrysler Media
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