Chrysler 2015 Annual Report Download - page 165

2015 | ANNUAL REPORT 165
Concurrent with the closing of the acquisition under the Equity Purchase Agreement, FCA US and UAW executed
and delivered a contractually binding and legally enforceable Memorandum of Understanding (“MOU”) to supplement
FCA US’s existing collective bargaining agreement. Under the MOU, the UAW committed to (i)use the best efforts
to cooperate in the continued roll-out of FCA US’s World Class Manufacturing (“WCM”) programs, (ii)to actively
participate in benchmarking efforts associated with implementation of WCM programs across all FCA’s manufacturing
sites to ensure objective competitive assessments of operational performance and provide a framework for the proper
application of WCM principles, and (iii)to actively assist in the achievement of FCA US’s long-term business plan. In
consideration for these legally enforceable commitments, FCA US agreed to make payments to a UAW-organized
independent VEBA Trust totaling U.S.$700 million (€518 million at the transaction date) to be paid in four equal annual
installments. Considering FCA US’s non-performance risk over the payment period as of the transaction date and its
unsecured nature, this payment obligation had a fair value of U.S.$672 million (€497 million) as of the transaction date.
The Group considered the terms and conditions set forth in the above mentioned agreements and accounted for
the Equity Purchase Agreement and the MOU as a single commercial transaction with multiple elements. As such,
the fair value of the consideration paid discussed above, which amounts to U.S.$4,624 million (€3,411 million at the
transaction date), including the fair value of the previously exercised disputed options, was allocated to the elements
obtained by the Group. Due to the unique nature and inherent judgment involved in determining the fair value of
the UAW’s commitments under the MOU, a residual value methodology was used to determine the portion of the
consideration paid attributable to the UAW’s commitments as follows:
January 21, 2014
(€ million)
Special distribution from FCA US 1,404
Cash payment from FCA NA 1,287
Fair value of the previously exercised options 223
Fair value of financial commitments under the MOU 497
Fair value of total consideration paid 3,411
Less the fair value of an approximately 41.5 percent non-controlling ownership interest in FCA US (2,916)
Consideration allocated to the UAW’s commitments 495
The fair value of the 41.5 percent non-controlling ownership interest in FCA US acquired by FCA from the VEBA Trust
(which includes the approximately 10 percent pursuant to the settlement of the previously exercised options discussed
above) was determined using the valuation methodology discussed above.
The residual of the fair value of the consideration paid of U.S.$670 million (€495 million) was allocated to the UAW’s
contractually binding and legally enforceable commitments to FCA US under the MOU.
The effects of changes in ownership interests in FCA US were as follows:
January 21, 2014
(€million)
Carrying amount of non-controlling interest acquired 3,976
Less consideration allocated to the acquisition of the non-controlling interest (2,916)
Additional net deferred tax assets 251
Effect on the equity attributable to owners of the parent 1,311
In accordance with IFRS 10 – Consolidated Financial Statements, equity reserves were adjusted to reflect the change
in the ownership interest in FCA US through a corresponding adjustment to Equity attributable to the parent. As the
transaction described above resulted in the elimination of the non-controlling interest in FCA US, all items of Other
comprehensive income/(loss) previously attributed to the non-controlling interest were recognized in equity reserves.