Italy’s Fiat SpA may hold an initial public offering (IPO) for Chrysler Group LLC as early as the first quarter of next year, according Fiat CEO Sergio Marchionne. But that is not Fiat’s preferred option.

Fiat has a 58.5% stake in Chrysler and wants to acquire the rest of the company from the pension fund that owns the remaining 41.5% — an offer the fund has found easy to reject. The United Auto Workers Retiree Medical Benefits Trust, a voluntary employees’ beneficiary association known as a VEBA, has been trying to force Fiat to offer a portion of Chrysler in an initial public offering (IPO), believing that the trust will realize a larger gain. Fiat wants to buy the VEBA’s stake in Chrysler for as little as possible.

Last January, Fiat exercised a second call option on a 3.3% stake in Chrysler then held by the VEBA. The proposed price, $198 million, valued Chrysler at around $6 billion. In the agreement made in 2009 that saved Chrysler from bankruptcy, the VEBA’s proceeds from the sale of its stake in Chrysler were capped at an initial value of $4.25 billion, which would grow at a compound rate of 9% annually. At that level, the trust’s payout from its stake now exceeds $5 billion.

That values all of Chrysler at around $12 billion, which is $3 billion more than UBS bank estimate of the automaker’s value, according to a report from Reuters. At that valuation, trust’s stake is worth about $3.735 billion.

The VEBA demanded in January that Fiat register for an IPO of 16.6% of Chrysler shares owned by the trust. Marchionne may have no choice. As interest rates rise, financing a buyout gets more expensive, and time is not on Fiat’s side. Marchionne may not like the choice of an IPO, but other options have about disappeared.

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