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Wall Street veteran leads UAW trust in fight with Fiat over Chrysler

Fiat Chief Executive Sergio Marchionne poses during a visit at the carmaker's Sevelsud plant in Atessa, central Italy, July 9, 2013. REUTERS
Fiat Chief Executive Sergio Marchionne poses during a visit at the carmaker's Sevelsud plant in Atessa, central Italy, July 9, 2013. REUTERS

By Deepa Seetharaman and Jennifer Clark

DETROIT (Reuters) - Sergio Marchionne, the chief executive of automakers Fiat and Chrysler, is well-known as a tough and shrewd negotiator. But he may have met his match in Alain Lebec.

The French-born investment banker is a key adviser to a United Auto Workers healthcare trust fund that assumed a stake in Chrysler after the Obama administration's bankruptcy restructuring of the U.S. automaker in 2009.

Just how the trust maneuvers its exit from Chrysler is one of the unresolved issues from bankruptcy. Lebec aims to get largest payout possible for its 41.5 percent stake, the proceeds of which must be used to fund medical benefits for current and future blue-collar Chrysler retirees over the coming decades.

Marchionne, for his part, is eager for Fiat, the parent and majority shareholder of Chrysler, to buy out the trust's shares at a much lower price. Their long-running tug-of-war will intensify in Chrysler's expected initial public offering filing by the end of the month.

Steering the trust through this complex situation is yet another high-stakes role for Lebec. The low-key, 40-year veteran of Wall Street orchestrated some of the most significant telecommunications deals of the 1990s while at Merrill Lynch. He also advised General Motors Corp during that time.

That Chrysler's IPO is going forward - over Marchionne's strenuous objections - demonstrates Lebec's outsized influence over the future of Fiat-Chrysler and the timing of Marchionne's plan to merge the two companies fully.

Lebec's negotiating stance is strengthened by the UAW trust's stronger-than-expected financial condition and an unusual provision in the bankruptcy deal that gives the trust the power maximize its returns by forcing Chrysler to go public.

"Sergio's plans are of zero interest to him," said Maryann Keller, managing director of auto consulting firm Maryann Keller & Associates. "The only thing that matters to him -- and should matter to him - is how much money am I getting for my shares?"

Lebec, now a senior managing director at New York-based Brock Capital, declined to comment. Brock Fiduciary, the Brock unit that has managed the UAW trust's Chrysler stake since 2010, also declined to comment as did Chrysler and the UAW trust, a type known as a voluntary employees' beneficiary association (VEBA).

Marchionne already runs Chrysler and Fiat as a single company. Now, he wants to buy the rest of Chrysler to squeeze out more synergies, cut borrowing costs and access Chrysler's cash flow. Fitch Ratings said Wednesday that it has a negative outlook on the Italian automaker and said there are "material uncertainties" around Fiat's ability to fully own Chrysler.

THE ANTITHESIS OF GORDON GEKKO

Former colleagues, friends and others familiar with Lebec's work described him as a well-informed and meticulous adviser who is unusual among bankers for his willingness to do the analytical grunt work typically relegated to junior associates. He rarely loses his cool.

"A lot of people think of investment bankers as wanting their names in the press and driving the fancy cars and being the Gordon Gekkos of the world," said Sidney Goodfriend, a former Merrill banker who lives less than a mile from Lebec in Greenwich, Connecticut. "And Alain is exactly the opposite."

Lebec's hands-on approach extends to the READ Alliance, a nonprofit he co-founded with his wife Leah and former Federal Communications Commission Chairman Al Sikes that hires teenagers to tutor kindergarten and first-grade students in reading.

Since the nonprofit opened in 2000, the Lebecs have donated more than $850,000, READ executive director Kelley Perkins said, although she jokes Lebec "knows better than this organization because he keeps such good records."

Lebec, who grew up in Paris and still speaks English with a French accent, served in the French army before moving to the United States to attend Northwestern University's Kellogg School of Management in Evanston, Illinois.

He already had his heart set on Wall Street when he interviewed at Chicago-based bank A.G. Becker, said Barry Friedberg, who hired Lebec out of business school in 1973 and went on to head up Merrill's investment banking division.

Becker was on the cusp of expanding its mergers and acquisitions practice when Lebec joined the firm. In 1984, A.G. Becker was bought by Merrill Lynch. He ran Merrill's M&A group for a time and then its telecoms, media and technology group.

Goodfriend, founder and now chairman of the nonprofit American Corporate Partners in 2008, said Lebec was instrumental in the late 1990s in convincing then-IBM CEO Louis Gerstner to sell the company's global data network "today and not tomorrow."

A PRESENCE IN THE ROOM

Lebec's knowledge of the U.S. auto industry stems in part from his experience advising GM during the 1990s. At the time, the largest U.S. automaker was selling its defense and technology businesses to focus on vehicle development.

Peter Bible, GM's chief accounting officer from 1996 to 2006, recalled that Lebec has worked on many GM transactions, including the $9.8 billion spinoff of Hughes Electronics to Raytheon Co in 1997.

"Not that many people last that long in investment banking because of the wear and tear on your body and mind," Bible, now chief risk officer of accounting firm EisnerAmper, said of Lebec in an interview. "He was a presence. When he was in the room, people knew who he was."

After leaving Merrill in 2003, Lebec went on to run his own consulting company, GCX Advisors LLC, and joined Brock. He works between 100 and 200 hours a month for Brock Fiduciary, on top of the 60 hours a month at GCX, U.S. regulatory records show.

People familiar with the VEBA negotiations have previously said Lebec is holding out for a $5 billion-plus payout for the trust, to which Marchionne publicly responded: "(They) should buy a ticket for the lottery."

The VEBA declined to say how and why it selected Brock as the independent fiduciary overseeing its Chrysler stake. Brock is also overseeing the VEBA's securities in GM, which is still about 7 percent owned by the U.S. government.

Both Fiat and Chrysler were brought under Marchionne's stewardship in 2009. As part of the bankruptcy agreement, the VEBA trust agreed to take a majority stake in Chrysler in lieu of cash, an act Marchionne once called a "flying leap of faith."

But few predicted the strength of Chrysler's resurgence. This has complicated Marchionne's relationship with the trust as well as his plans to consolidate the two companies. Fiat currently owns the remaining 58.5 percent of Chrysler.

Marchionne has said Chrysler could make its debut on the public markets during the first quarter of 2014. An IPO would not completely dispose of the VEBA's stake. The VEBA and Fiat are still mired in a lengthy legal dispute over Chrysler's worth.

(Editing by Frank McGurty)

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