Italian automotive giant Fiat and America’s Chrysler are joining forces in a deal that throws the cash-strapped US carmaker a timely lifleline
It gives Chrysler access to competitive, fuel efficient small and medium-sized car platforms and powertrains, avoiding billions of dollars in development and tooling costs as it works its way back from the brink of financial ruin.
It has to submit a recovery plan to the US government next month; it has already indicated it is scrapping the PT Cruiser and has put Viper up for sale.
From Fiat’s perspective, the deal gives it a base in America and it can get cars built in US factories. Fiat hasn’t sold cars in America since 1983, and its Alfa Romeo sporting brand hasn’t sold cars there since 1994.
The deal could see Fiat building the 500 minicar and some Alfa Romeo models at American Chrysler plants and selling them through Chrysler dealers.
Fiat, Chrysler and Cerberus Capital Management, the private investment majority owner of Chrysler, yesterday signed a non-binding term sheet to establish a global strategic alliance.
Under the deal, which hinges on due diligence and US Treasury approval, Fiat gets a 35 percent holding in Chrysler without putting up any money.
Chrysler says the alliance is a key element of its viability plan and chairman, Bob Nardelli, says a partnership with Fiat “creates the potential for a powerful, new global competitor” with production- and development-sharing efficiencies and immense buying power with outside suppliers. There’s potential to save several billion dollars a year.
Chrysler would get “access to products that compliment our current portfolio (in other words, small car platforms), a distribution network outside North America (specifically in Europe and South America), and cost savings in design, engineering, manufacturing, purchasing and sales and marketing.
"This transaction will enable Chrysler to offer a broader competitive line-up (that meets) emissions and fuel efficiency standards, while adhering to conditions of the (US) Government loan,” says Nardelli.
US reports suggest that, eventually, Fiat could buy a majority interest in Chrysler.