Chrysler, Fiat Sign Global Strategic Alliance Deal
By Michelle Krebs January 20, 2009By Michelle Krebs
Auburn Hills, Mich. -- Chrysler confirmed early Tuesday morning that it, along with its majority owner Cerberus Capital Management, had signed a deal with Italy's Fiat to establish what it called a global strategic alliance.
Chrysler said the alliance is a key element of its viability plan that must be submitted to Congress by the end of this quarter. The automaker said in a statement posted on its Web site that the alliance would allow Fiat and Chrysler to take advantage of each other's distribution networks and "optimize fully their respective manufacturing footprint and global supplier base."
Under the terms of deal, Fiat takes an initial 35 percent equity interest in Chrysler for which it will not pay cash nor commit to future funding for Chrysler. Chrysler said Fiat would provide the automaker 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.
The deal includes:
-- 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, detailed by Edmunds' Green Car Advisor;
-- and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America.
While the statement from the companies didn't say so specifically, the Chrysler-Fiat alliance also gives Fiat access to the American market, from which it has long been absent. Fiat had plans to begin selling its Alfa-Romeo line in the U.S., plans that were postponed or derailed by the current economic crisis.
In the companies' statement, Fiat CEO Sergio Marchionne, who is credited with Fiat's recent financial turnaround and who has made it quite public that he wanted a strategic alliance, said: "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."
He added: "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."
Chrysler Chairman and CEO Bob Nardelli, who also has been very public about the automaker seeking strategic alliances 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."
He said the deal will enable Chrysler to offer a broader competitive lineup 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," he added.
United Auto Workers (UAW) President Ron Gettelfinger, who is negotiating new contract terms with Chrysler and General Motors as part of the federal loan agreement, praised the deal. "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," he said.
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Fiat has a plethora of different cars ("the Italian GM") under the Fiat marque alone, not including its Alfa Romeo and Lancia models. This just might work; although I'd prefer to see Fiat on the showfloor as Fiats, Alfas, and Lancias rather than re-badged Chryslers or Dodges.
Saaaay, doesn't Chrysler already have a longstanding alliance with global small car maker Mitsubishi? Why not pump that deal back up?
Shoulda kept Simca after all.
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