Chrysler Hopes Offering Will Raise $400 Million
In a bid to bolster its finances, Chrysler Corp. on Wednesday announced plans for a major new stock offering that could raise more than $400 million for the struggling auto maker.
In a government filing, the nation’s No. 3 auto company proposed selling 33 million newly issued shares of common stock to the public. A second offering of about 23 million shares would be placed in Chrysler’s pension plans.
All told, the new shares would represent 20% of Chrysler’s common stock once the offerings are completed. Chrysler has about 224 million shares outstanding.
The sale to the public could bring as much as $450 million of fresh capital into the company’s coffers.
Chrysler, like General Motors Corp. and Ford Motor Co., its bigger U.S. rivals, has watched sales plummet and losses soar as the recession has eroded consumers’ desire for new vehicles.
But more than GM or Ford, Chrysler has had trouble raising funds to invest in developing new vehicles that could lure new buyers.
Chrysler said the offering is part of a plan to strengthen its financial condition. It also said it hopes the plan will help stabilize its junk bond credit ratings and those of its finance subsidiary, Chrysler Financial Corp.
After the major bond-rating agencies cut their rankings of Chrysler’s bonds, the company found itself locked out of key credit markets, which has raised the cost of borrowing.
Industry analysts said that given Chrysler’s limited fund-raising options, the stock offering was one of the few ways left for the auto maker to weather the storm of recession.
“I can’t tell you the extent to which I’ve been briefed not to comment on that (the offering),” Chrysler President Robert A. Lutz said after a speech Wednesday at an automotive management conference in Traverse City, Mich. “This is so sensitive that I couldn’t even go back to the office today if I said anything about it.”
Chrysler has not made much progress with asset sales, which is another major potential source of fresh funds.