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Will Fiat Deal Save Chrysler?

Proposed alliance could save money, add global reach

by on Jan.20, 2009

Chrysler turns to the Italians for salvation

Chrysler turns to the Italians for salvation

The perennially-troubled Chrysler LLC will form a new “global strategic alliance” with the Italian automaker that often has words like “weak,” and “troubled,,” associated with its own name, Fiat s.P.a. Barring problems with federal overseers, who must review the proposed deal – and give a sign-off on Chrysler’s business plan – the two automakers’ alliance could come together in April.

The announcement, which first reported on yesterday, comes nearly 20 years after Chrysler and Fiat called off a proposed, trans-Atlantic merger. The new deal will be significantly less far-reaching in scope, though it could still play a critical role in determining the companies’ long-term viability, according to industry observers.

The proposed deal, said a press release, “would provide Chrysler 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” stemming, among other things, through increased economies of scale.

One of the more telling comments in the release, which seems to underscore just had badly understaffed Chrysler has become as it has been forced to pare back to survive, notes that, “Fiat would provide management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury as required.”