Fiat and Chrysler to form global alliance
Italy’s Fiat will take a 35 percent stake in U.S. car maker Chrysler LLC — valued at zero by its part-owner — in a deal aimed at helping the pair survive the worst crisis to hit their industry in decades.
Fiat is not paying cash for the stake but in return will share products and platforms for small cars with Chrysler, which has already grasped billions of dollars from the U.S. government to avoid bankruptcy. It will also share its green technologies.
Chrysler, which makes gas-guzzling Jeep and Dodge, is 80.1 percent owned by Cerberus Capital Management, which paid $7.2 billion for that stake in 2007. The rest is held by German car maker Daimler, which considers the 19.9 percent holding to have no value.
Fiat, worth about $7.5 billion, has said it needs a partner to make it big enough to survive. Chief Executive Sergio Marchionne said in a joint statement the deal was designed to help Fiat boost its volumes. It will also help Fiat return to the U.S. market where it has long been absent.
Chrysler is the No. 3 U.S. car maker by sales. In a letter to employees, Chrysler Chief Executive Bob Nardelli said the deal would “significantly enhance the long-term viability” of the company.
The deal will allow Chrysler to sell in more foreign markets, give it access to fuel-efficient technology and expand its product portfolio with small cars, a Fiat specialty faxless payday advance.
The agreement would also help the two cut costs.
Speaking to reporters at an event in Milan, Fiat Vice Chairman John Elkann said Fiat could raise its stake.
Fiat shares jumped 4.46 percent to 4.68 euros after being halted from trade ahead of the news.
Italian Economy Minister Giulio Tremonti said the alliance was “good news,” and a sign of vitality.
CHEAP TICKET TO THE UNITED STATES
Analysts said the outlined deal looked mostly positive for Fiat because they saw it as a cheap way for it to enter the U.S. market — still huge despite falling sales, especially for gas-guzzling vehicles.
Some of them had doubts about its success in helping Chrysler, the weakest of Detroit’s three car makers.
“What Daimler or private equity could not fix is not likely to be fixed by Fiat,” Harald Hendrikse at Bank of America Merrill Lynch said in a note.
Nardelli said he expected the deal to be closed as early as April.