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Chrysler, Fiat Alliance May Give Italians Control

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The Associated Press

Published: January 21, 2009

ROME - Fiat and Chrysler said Tuesday they have agreed to form a strategic alliance that would give the Italian auto empire a 35 percent stake in the troubled U.S. carmaker and eventually could give it full control.

The deal means Chrysler, which is fighting off bankruptcy and struggling to sell less fuel-efficient larger models, would have access to new markets and cheaper, more environmentally friendly technologies.
Fiat Group SpA, which makes Fiat, Lancia and Alfa Romeo vehicles, would gain a foothold in the huge U.S. market.

The two companies announced in a joint written statement that in exchange for sharing its small-car platforms and fuel-efficient engines, Fiat would take an "initial" 35 percent stake in Chrysler but would not invest cash.

The indication that Fiat could gain full control was supported by John Elkann, Fiat vice president and heir of its founding Agnelli family, who was quoted by the ANSA news agency as saying that the company's stake "could increase."

The joint statement stresses that Turin-based Fiat is not committing to funding Chrysler in the future.

For Chrysler, based in Auburn Hills, Mich., the deal would mean breaking out of the North America market and gaining access to more competitive products.

Under the deal, Chrysler will be able to manufacture and market in the United States new models based on Fiat platforms as well as the Italian company's own products.

The alliance is subject to a review of company finances and regulatory approvals, including by the U.S. Treasury Department, which last week announced an emergency bridge loan for Chrysler.

"The agreement will offer both companies opportunities to gain access to most relevant automotive markets with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader, while benefiting from additional cost synergies," said Fiat Chief Executive Officer Sergio Marchionne.

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