By Soyoung Kim and Deepa Seetharaman
NEW YORK/DETROIT (Reuters) - Chrysler Group LLC's second-largest shareholder, a union healthcare trust fund, has tapped Deutsche Bank (DBK.DE) for advice on how to exit its 41.5 percent stake in No. 3 U.S. automaker, according to two people familiar with the matter.
The investment bank is advising the trust fund, which is affiliated with the United Auto Workers union, in the midst of intensifying and heated talks with main owner Italian automaker Fiat SpA (MIL:F) over the stake's value.
The trust fund is weighing the benefits of a gradual sale of its stake through an initial public offering against an outright sale to Fiat, the people said on Wednesday, asking not to be identified because of the confidential nature of the matter.
Fiat, which owns 58.5 percent of Chrysler, wants to buy out the UAW trust and gain full control of the company. But the trust's asking price of more than $5 billion is far more than Chief Executive Sergio Marchionne is willing to pay.
The feud came to a head on Monday when the trust, known as the VEBA, forced Chrysler to file IPO paperwork. The VEBA won the right to do this under the terms of Chrysler's 2009 government-backed bankruptcy restructuring.
The IPO process would put Marchionne, who has run both automakers since 2009, in the awkward spot of having to sell potential investors on a stock offering he has sought to avoid.
He has publicly said an IPO would undermine his plans to merge the two companies and create the world's seventh-largest auto group. Monday's filing now steps up pressure on Marchionne to seal a deal with the VEBA and avoid going public.
The VEBA, which pays medical benefits for blue-collar auto retirees, did not immediately respond to requests for comment. Brock Fiduciary, which has managed the trust's holdings in Chrysler since 2010, and Deutsche Bank declined to comment.
Deutsche Bank has worked with VEBA on other deals in the past. Alain Lebec, the investment banker leading the Brock team, has close ties with Paul Stefanick, co-head of global investment banking coverage and advisory at Deutsche Bank. Both bankers previously worked at Merrill Lynch.
Fiat hired a veteran of the 2009 U.S. auto bailout, Lazard Vice Chairman Ron Bloom, in a bid to break the impasse with the VEBA. JPMorgan Chase & Co (JPM) was appointed to lead the Chrysler IPO if the Fiat buyout fails to happen.
A buyout of the VEBA's stake would allow Fiat to gain full access to Chrysler's cash and technology to stay competitive.
Marchionne has guided the U.S. automaker's unlikely comeback that has pushed its value above $10 billion, according to some analyst estimates. But the talks with the VEBA have tested his considerable talents as a dealmaker.
(Editing by Matthew Lewis and Ken Wills)