Fiat and Chrysler create alliance

by GD Tue 20 Jan 2009, 2:04 pm

Italian carmaker Fiat and US giant Chrysler have agreed to create a global strategic alliance, the companies said in a statement.

Under the terms of the deal, Fiat will get a 35% stake in Chrysler. In return, the US firm will get access to Fiat's fuel-efficient vehicle technologies.

It is hoped the agreement will lead to "substantial" savings for Chrysler.

It is one of two Detroit-based carmakers to have received emergency US government loans.

"Fiat has been very successful in executing its own restructuring over the past several years," the statement said.

Who gets what

This initiative represents a key milestone in the rapidly changing landscape of the automotive sector

Sergio Marchionne, Fiat Group chief executive

Under the terms of the deal Chrysler will get:

• Access to Fiat's environmentally friendly vehicle technologies and components

• "Substantial cost savings opportunities"

• Access to Fiat's distribution network in "key growth markets" outside the US and its global supplier base.

In return, Fiat will receive:

• Access to Chrysler's distribution network and suppliers

• A 35% equity stake in Chrysler.

The statement points out, however, that the agreement does not commit Fiat to funding Chrysler in future.

The completion of the deal is subject to approval from regulatory authorities, including the US Treasury.

Earlier on Tuesday, trading in Fiat shares was suspended amid speculation of a possible partnership with the US firm.

After the announcement was made and trading in Fiat shares resumed, they rose 3.5%.

Recent troubles

Also on Tuesday, German carmaker Daimler said it was still interested in selling its 20% stake in Chrysler.

Carmakers around the world have seen their sales plummet amid the ongoing global economic slowdown.

In recent months both Fiat and Chrysler have been in the news, with Chrysler receiving billions of dollars in government help and Fiat saying it needed a partner because it was too small to continue on its own.

Fiat chief executive Sergio Marchionne said the deal represented "a key milestone in the rapidly changing landscape of the automotive sector".

Chrysler chairman Bob Nardelli said that the alliance "creates the potential for a powerful, new global competitor".

One day I reckon We will only see about 6 major suppliers of motor vehicles...