It's official! Fiat gets 35% stake in Chrysler for small cars
by Sam Abuelsamid on Jan 20th 2009 at 8:13AM 
Yesterdays rumors are today's reality: Chrysler and Fiat are hitching up. Chrysler's majority owner Cerberus will GIVE nearly half of its stake in Chrysler to Fiat. That's give as in, "please take it!" Fiat will will not pay Cerberus any cash in this deal. Instead Fiat will provide its small car platforms, powertrains and other systems to Chrysler with the hope that fleshing out its model line will allow it to become a viable automaker. Fiat will also provide distribution channels in overseas markets for Chrysler-branded vehicles. Chrysler will also get business planning help from Fiat with the hope of moving the viability plan that it must submit to the government forward.
According to the press release, Fiat isn't committing to provide any ongoing funding for Chrysler, likely because it doesn't really have the cash to spare, either. For Fiat, this could potentially provide the means that it has been looking for to get back into the U.S. market. Fiat had been considering a North American manufacturing site for Alfa Romeo cars for this market and now has access to plenty of Chrysler facilities. For Chrysler, it could use platforms like the Fiat 500 and Punto to create new, efficient small cars. The question is can they get something to market quick enough to maker a difference. The full press release is after the jump.
[Source: Chrysler]
Fiat Group, Chrysler and Cerberus Announce Plans for a Global Strategic Alliance
Posted Jan 20, 2009, 06:06 AM by Editor
Category: Global Growth
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Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler LLC, announced today they have signed a non-binding term sheet to establish a global strategic alliance.
The alliance, to be a key element of Chrysler's viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities. In addition, Fiat would provide management services supporting Chrysler's submission of a viability plan to the U.S. Treasury as required. Fiat has been very successful in executing its own restructuring over the past several years. The alliance would also allow Fiat Group and Chrysler to take advantage of each other's distribution networks and to optimize fully their respective manufacturing footprint and global supplier base.
The proposed alliance would be consistent with the terms and conditions of the U.S. Treasury financing to Chrysler. Per the U.S. Treasury loan agreement, each constituent will be asked to contribute to Chrysler's restructuring effort including: lenders, employees, the UAW, dealers, suppliers and Chrysler Financial. Such steps would greatly contribute to Chrysler's long term viability plan. Completion of the alliance is subject to due diligence and regulatory approvals, including the U.S. Treasury.
As a consideration for Fiat Group's contribution to the alliance of strategic assets, to include: product and platform sharing, including city and compact segment vehicles, to expand Chrysler's current product portfolio; technology sharing, including fuel efficient and environmentally friendly powertrain technologies; and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America, Fiat would receive an initial 35 percent equity interest in Chrysler. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.
"This initiative represents a key milestone in the rapidly changing landscape of the automotive sector and confirms Fiat and Chrysler commitment and determination to continue to play a significant role in this global process. 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 benefitting from additional cost synergies. The deal follows a number of targeted alliances and partnerships signed by the Fiat Group with leading carmakers and automotive suppliers over the last five years aimed at supporting the growth and volume aspirations of the partners involved," the CEO of Fiat Group, Sergio Marchionne said.
"A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits, including access to products that compliment our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and sales and marketing," said Bob Nardelli, Chairman and CEO of Chrysler LLC. "This transaction will enable Chrysler to offer a broader competitive line-up of vehicles for our dealers and customers that meet emissions and fuel efficiency standards, while adhering to conditions of the Government Loan. The partnership would also provide a return on investment for the American taxpayer by securing the long-term viability of Chrysler brands in the marketplace, sustaining future product and technology development for our country and building renewed consumer confidence, while preserving American jobs."
"This is great news for the UAW Chrysler team and we look forward to supporting and working with them to ensure Chrysler's long term viability," said Ron Gettelfinger, President United Auto Workers (UAW).
"We're on board with this important strategic initiative as it will help preserve the long-term viability of our great company, its brands and of course UAW-Chrysler jobs," said General Holiefield, Vice President, United Auto Workers (UAW).
Reader Comments (Page 1 of 1)
Peter L 8:41AM (1/20/2009)
This is a real surprise and could be a good marriage.
The Fiat 500 and Punto are great small cars that might do well in N.Am.
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ale 8:51AM (1/20/2009)
i wonder how an SRT Fiat 500 will sound...
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realistic_idealist 9:08AM (1/20/2009)
too no one's surprise Chrysler finally whored itself off to the cheapest suitor.
the Dodge brothers must be rolling in their graves or maybe they're laughing with karma on this one...
"another one bites the dust"
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freshforged 9:24AM (1/20/2009)
This looks lke a win/win deal. And unlike the ruinous "merger of equals" with Daimler, chrysler only gives up 35% equity. Best of all, this likely means more workers get to keep their jobs.
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Beavker 9:59AM (1/20/2009)
You beat CNBC to the punch by an hour on this news. A financial 'news' network. Nice work. CNBC was no doubt busy pandering to their major contributors instead of actually reporting news (Apple, Big Oil, any Financial Institution) and telling it's viewers what to think instead of reporting news that could be used by it's viewers to actually make investment decisions.
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EV-1 1:19PM (1/20/2009)
While the Fiat 500 is an extremely cute and very likeable little car,
I can't see what Chrysler might have, that's worth this Fiat sellout ?
The cute Fiat 500 - a nod to the legendary minicar - would make a good BEV, though I'm much more fascinated by the Citroën C1 / Peugeot 107 design with their FIVE-DOOR (!) concept in just as small formfactor = their design is just mindboggling !
Compact AND extremely flexible at the same time ; like cramming five-door desing onto a matchbox =D !
I can't wait to see them as EVs !
Until then, let's hope Chrysler takes to learning from one of the worlds leading small-car manufacturers. Fiat is certainly the most experienced in that segment.
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Andrea 7:37AM (1/21/2009)
Don't forget the Fiat Panda. It's the most reliable in the superminis segment, it also offers 5 door and a lot of room inside (more than the french-jap trio).
Fiat is leader in small cars
v moreno 8:17PM (2/10/2009)
Yes . Yes
Throwback 1:53PM (1/20/2009)
Fiat knows small cars, so this could be good for Chrysler. As for Fiat, I guess they get plants and dealers which will include the UAW and all those legacy costs. I don't see how this benefits Fiat long term.
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Torbjorn 8:42PM (1/20/2009)
I don't think FIAT is responsible for Chrysler workers. They are only offering their cars to Chrysler to sell in their showrooms. FIAT may not ever be built here in the U.S. with our own workers at all. FIAT has only a 35% stake, which they got for free. Daimler still has their portion and so does Cerberus. For the business venture to work, FIAT should not try to manufacture the car in the U.S. or any expensive labor country for that matter. Remember, the idea is to keep the price as cheap as possible with these small cars.
Burt 2:48PM (1/23/2009)
Why in the world should we give Millions of dollars to help Chrysler and they give 35 % of their company to Fiat. The American people are footing enough of waste and poor Management. Lets keep the money here .
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joseph 7:36AM (1/24/2009)
Chrysler, is the real whore of the industry! once a proud and trusted for engineering corp , it is now the two bit street walker of detroit!!
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Mike 12:27PM (1/25/2009)
This is such a bad idea....it might just work!
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mr.vail 9:31AM (1/26/2009)
This is good for both companies, it gives chrysler a new direction, and fiat an open door to the US market once again.
This could be a win win for both.
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