Fiat, Chrysler Announce Plan for a Global Alliance

Fiat, Chrysler Announce Plan for a Global Alliance
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After talks fell through with General Motors and Renault/Nissan, Chrysler has found a likely partner to successfully move forward into the future. Italian-based automaker, Fiat S.p.A., and Chrysler LLC have confirmed that a non-binding agreement was signed that would give Chrysler access to Fiat’s smaller, fuel-efficient vehicle platforms in return for Fiat acquiring an initial 35 percent equity share in Chrysler. Fiat has the option to increase its share of Chrysler to as much as 55 percent at a later date. Both companies would also gain strategic access to the other’s distribution network. The alliance will ultimately provide “substantial cost saving opportunities” to both automakers.

Chrysler, currently owned by Cerberus Capital Management (80.1 percent) and Daimler AG (19.9 percent), has been searching for a partner to compete in the compact car market but attempts recently fell through with China-based Chery Automotive. A partnership between Nissan and Chrysler is not expected to produce any small cars in the United States although the next-generation Nissan Titan will share its platform with the Dodge Ram. Many fault Chrysler for its current financial situation blaming the company’s failure to diversify its products enough to include smaller, fuel-efficient vehicles. Chrysler would gain access to Fiat’s lineup of small cars including the Panda and the 500. In addition to platform sharing, Chrysler would also benefit from shared technology in environmentally friendly powertrains as well as using Fiat’s distribution network to break into new key markets.

Fiat, who will not be required to put up cash or financing for Chrysler, will also help develop a business plan to present to the U.S. Treasury after Chrysler recently was given emergency federal loans to stay alive. Fiat’s advantageous partnership will allow the company to re-enter the North American market and continue its own successful restructuring. Since the alliance will not produce excessive redundancies as the GM acquisition would have, the Fiat and Chrysler deal is expected to create a successful global competitor and, more importantly, preserve American jobs. As such, Cerberus and the UAW are both key supporters of the Fiat deal, which should help to fast track the alliance.


Source: Wall Street Journal

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