IRVINE and SANTA MONICA, Calif. -

Back in 2010, General Motors outlined its plans for an initial public offering in order to generate funds the automaker could use to repay the U.S. Treasury. This week, Chrysler filed paperwork for an IPO, too, but the purpose and potential outcome might not be as straightforward.

When asked by Auto Remarketing to explain what it means for Chrysler to make this move now, Kelley Blue Book senior analyst Alec Gutierrez began with, “Chrysler has come a long way since bankruptcy, and the IPO is further proof as their sales continue to soar to new heights.

“Interestingly, Chrysler’s IPO is being motivated by the need of the UAW health care trust to cash in on the company’s gains over the past several years to shore up their own cash reserves,” Gutierrez said. “This goes against Fiat’s desire for a 100-percent ownership stake in Chrysler, and in the end, may only serve as a negotiating tactic.”

Showing that Gutierrez isn’t just speculating, Chrysler explained its position in paperwork filed with the Securities and Exchange Commission late on Monday.

“Fiat has expressed its desire to acquire all of our outstanding equity or otherwise create a simplified, unified capital structure through the acquisition of the minority ownership in us held by the VEBA Trust, a portion of which will be sold in this offering,” Chrysler said. “Completion of this offering will prevent or delay Fiat from meeting this objective, and 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.

“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,” Chrysler continued.

“In light of Fiat’s concern that the full realization of the benefits of the Fiat-Chrysler Alliance may be prevented or delayed, Fiat therefore may also exercise its governance rights in a manner that it perceives will enhance the value of the Fiat-Chrysler Alliance to Fiat, rather than to Chrysler,” the automaker went on to say. “This could include decisions on capital preservation or allocation, investments and location of production facilities and other operational decisions.

“Further, Fiat may at any time, or from time to time, purchase or, following expiration of the lock-up period, sell shares of common stock on the open market (subject only to compliance with applicable securities laws). There can be no guarantee that Fiat will not pursue such a plan to achieve its objectives,” Chrysler added.

So how did Chrysler go from bankruptcy to an IPO and an apparent squabble with the UAW? Another KBB expert took on that question. Jack Nerad is the executive editorial director and market analyst at Kelley Blue Book.

“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, especially when that the ownership stake is held by an ‘interested party,’ in this case the United Auto Workers’ health care trust,” Nerad said.

“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,” he continued.

“The IPO could well be a stumbling block in the consolidation of Chrysler within a global Fiat operation, and current Chrysler workers might be better served if such a consolidation takes place. What is certain is that in the current market Chrysler would appear to have strong value if it were to go public,” Nerad went on to say.

Erik Gordon, a professor at the University of Michigan’s Ross School of Business and Michigan Law School, put it another way in a report published by Bloomberg.

“It’s a game of chicken,” Gordon told Bloomberg in this report. “If the IPO prices too low, the VEBA loses. If it prices higher than (Chrysler chief executive officer Sergio Marchionne) wants to pay, he is cornered, and will end up paying a premium.”

Regardless of how much the IPO generates, another KBB analyst described it as a positive for Chrysler.

“Chrysler’s turnaround confirms the success of the Fiat/Chrysler pairing,” said Karl Brauer, senior analyst at Kelley Blue Book. “The automaker is approaching four years of uninterrupted growth while leading many vehicle segments in terms of technology and fuel efficiency. The recent introduction of the updated Ram truck and all-new Jeep Cherokee have positioned Chrysler for continued success in two hot segments. This is a strategic time for the brand to issue an IPO.

“With over 40 months of consistent sales growth Chrysler has validated its turnaround efforts under Fiat and Sergio Marchionne,” Brauer went on to say. “Filing for an IPO allows the automaker to bolster its cash reserves as it invests in product development and expanded production capacity. These have been the key elements of the turnaround effort this far. Keeping them going remains a top priority for Marchionne and his executive team.”

Impact on Metal in Dealer Showrooms

Bill Visnic, senior editor at Edmunds.com, approached his commentary about the news from a different perspective — how it might change what kinds of models are heading to franchised dealers showroom or what used-car managers might be seeing in the wholesale market.

“Without yet knowing which way the Chrysler IPO will shake out, I think there could be a spectrum of potential product-related results,” Visnic began in a message to Auto Remarketing.

“If the IPO goes to a conventional culmination, that means Fiat likely will not own 100 percent of Chrysler — at least not at first,” he continued. “Without the ability to directly channel Chrysler financial resources as it sees fit, Fiat is likely to find itself cash-constrained for the near- to mid-term.

“As we’ve seen in the past with other automakers, as operating capital becomes more pressured, product-development programs often suffer delays or outright cancellation,” Visnic added.

Visnic then emphasized the end result “could” be that current models stay in the showroom longer and there is more time between substantive refreshes.

“With Fiat’s pressured business in Europe presumably accelerating the company’s cash burn, we already are seeing that happen with several previously announced programs from the 2009 restructuring plan,” he said.

“Some models slated to be added to the Chrysler lineup have been axed, other critical ones, such as replacement for the Chrysler 200 midsize sedan, have been pushed back. All this hurts even more because buyers are returning to the market now,” Visnic continued.

If Fiat is able to either broker a deal to buy the VEBA’s shares outside of an IPO or otherwise gain full control of Chrysler, Visnic noted that a combined Fiat-Chrysler operation would have more economies of scale.

“And with an ‘unlocking’ of Chrysler’s cash, Fiat presumably would have more latitude to develop and improve more models more quickly,” he said. “In effect, Chrysler's cash could be used — Fiat believes — to help expand both Chrysler and Fiat. That is supposed to mean more — and better — models in the showrooms on a faster cadence.

Like the analysts at KBB, Visnic from Edmunds.com called Chrysler a great recovery story.

“But in my opinion, the company has gaping holes in its product lineup,” Visnic said. “It desperately needs a competitive midsize family sedan — one of the market’s most expansive segments at the moment — same for a compact crossover outside the Jeep brand.

“The Dodge Dart has been a disappointment and needs a thorough overhaul, and maintaining relevancy for the Ram brand is going to be a chore,” he continued.

“All this costs money, and Mr. Marchionne believes that Fiat and Chrysler, divided, are much weaker than the two companies combined,” Visnic went on to say.

Nick Zulovich can be reached at nzulovich@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.