Breaking News: Fiat Confirms Plan to Take 35% Stake in Chrysler LLC

Confirming earlier reports, the Fiat Group and Chrysler LLC today issued a joint statement revealing that they have signed "a non-binding term sheet to establish a global strategic alliance." Under the agreement, Fiat will take an initial 35% equity interest in Chrysler with an option to increase its stake. However, the Italian automaker would not be obliged "to make a cash investment or commit to funding Chrysler in the future".

The alliance between the two automakers will give Chrysler access to Fiat's fuel-efficient city and compact segment vehicle platforms, powertrain, and components that would be produced at Chrysler manufacturing sites, as well as access to additional markets outside North America using Fiat's distribution network.

Aside from the cost savings opportunities, Fiat aims to use Chrysler LLC's North American manufacturing plants to build /assemble Alfa Romeo and Fiat models bound for the U.S. market and to take advantage of the American automaker's Chrysler, Dodge and Jeep dealerships to sell its products in the U.S.

The projected deal between Chrysler and Fiat was received lukewarm by the President of the United Auto Workers (UAW), Ron Gettelfinger who said, ""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."

"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 complement 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."