Fiat & Chrysler In Partnership Talks

Fiat & Chrysler In Partnership Talks

TURIN, Italy (Reuters) - Fiat (FIA.MI) is talking with Chrysler LLC about giving it access to its technology in exchange for a stake in the U.S. car maker, a source close to the Italian group said on Monday.

“Between the two groups there is talk about Chrysler possibly using Fiat technology in exchange for a stake,” the source told Reuters, confirming a report by industry publication Automotive News Europe. The source spoke on condition of anonymity.

Citing people familiar with the matter, Automotive News said in a report posted on its website (www.autonews.com) earlier in the day that Fiat could give Chrysler access to platforms, engines and transmissions.

The source told Reuters a deal with Fiat would help Chrysler make vehicles that produce fewer harmful emissions.

“To get financing U.S. (car makers) have to show that they are really committed to developing over the short term a new family of vehicles that pollute less,” the source said. “By itself, Chrysler would not be able to meet this condition.”

Along with General Motors (GM.N), Chrysler has gotten billions of euros in government loans to avert collapse in exchange for meeting certain cost-cutting targets and demonstrating that they are viable by the end of March.

Neither Fiat, Chrysler nor its owner, Cerberus Capital Management [CBS.UL], were immediately available for comment.

Fiat’s stock ended 4.9 percent lower at 4.48 euros, recovering some lost ground after earlier news that it could only meet its 2010 targets if the market returned to normal — something seen by analysts as being far from likely.

BET ON CHRYSLER’S FUTURE

In an interview with the same publication in December, Fiat Chief Executive Sergio Marchionne said Fiat needed a partner because it was too small to survive the crisis alone. He said automakers needed to have scale — producing at least 5.5-6.0 million cars a year — to have a chance of making money.

One London analyst said scale was probably the reason behind Fiat’s interest in Chrysler, despite the U.S. car maker’s desperate situation.

“This is a bet that Chrysler in some form will exist (in the future),” he said on condition of anonymity.

Apart from Ferrari and Maserati, Fiat does not sell cars under its three other brands in the United States.

Before crisis struck the car industry and decimated sales, Fiat had been talking with the three U.S. automakers about using some of their idle production lines to help it make a return to the U.S. market.

A second London analyst said the stake that Fiat could take in Chrysler would likely be a token 5 percent. Fiat would probably use Chrysler’s dealership network to sell small cars, something which is lacking from Chrysler’s product portfolio, the analyst said.

Although Chrysler denies positioning itself for a sale, it has been in talks with other manufacturers.

Chrysler Vice Chairman Tom LaSorda said last week it was not selling brands but hoped to sell equipment used to make one of its models, the PT Cruiser.

He declined to comment on a Reuters report about Chrysler having discussed selling assets to Renault-Nissan (RENA.PA)(7201.T) and Magna International (MGa.TO).

Seen as the weakest of the Detroit manufacturers, Chrysler is in such a difficult situation that analysts question whether it can survive without a merger partner.

It suffered a 30 percent drop in sales in 2008.

In the second half of 2008, it burned through $9 billion to end the year with $2 billion in cash.

In a bid to cut costs and save cash, it has shut down all 30 of its U.S. plants for a month from the middle of December.

Fiat and other car makers have also been halting production to lower their inventories of unsold vehicles.

Moving the metal has meant offering attractive deals to lure drivers back to showrooms.

In Chrysler’s case, its finance arm has begun offering zero percent financing after getting a $1.5 billion loan from the U.S. Treasury.

By Gianni Montani
(Additional reporting by Gilles Castonguay in Milan and David Bailey in Detroit)
(Writing by Gilles Castonguay; Editing by Hans Peters and Martin Golan)

 

A rumor has been circulating for months that Viper is for sale.

 

Well, yes and no. No automobile manufacturer in the World will escape from this crisis unscathed. Plants closed, mergers, cross license of intellectual property, shared engineering and manufacturing. Maybe you've forgotten.......or aren't old enough....
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Fiat Taking 35% Stake in Chrysler


MILAN/PARIS (Reuters) - Italy’s Fiat took a 35 percent stake in Chrysler, launching a venture designed to secure the beleaguered U.S. carmaker’s future, as France asked its auto industry to commit to output targets in exchange for aid.

Chrysler said on Tuesday the deal, which involves no cash investment, formed a key component of plans to secure its future, and would grant it access to Fiat’s more fuel-efficient vehicle platforms, engines and transmissions.

With governments struggling to fashion a coordinated response to the worst crisis to hit the auto industry in decades, French Prime Minister Francois Fillon said the sector was in urgent need of fresh funds and his government was considering a package worth 5-6 billion euros. “I think all European governments share this opinion … There is an emergency. We need a massive response on the automobile sector’s financing,” he told a French car industry summit.

German carmakers also took steps to bolster hemorrhaging cash reserves, though German Chancellor Angela Merkel criticized subsidies to the sector and warned that state bailouts risked distorting competition and did not offer a long-term solution to the crisis.

Under measures to be announced in the coming days, Fillon said French carmakers would be expected to make commitments on production volumes and business with suppliers in exchange for state aid.

Peugeot chief executive Christian Streiff warned on Monday that 2009 would be a “terrible year,” while his counterpart at Renault-Nissan, Carlos Ghosn, forecast on Tuesday that the auto sector crisis would be a long one.

In Tokyo, the world’s biggest carmaker Toyota Motor Corp — expected to post its first ever operating loss this year — named the grandson of the company’s founder to steer it through the crisis.

ECONOMIES OF SCALE

Fiat’s deal with Chrysler will give the Italian carmaker the scale it needs to survive, while Chrysler can expand its product portfolio to include small, less-polluting cars.

Cost savings from the collaboration are estimated at $3-$4 billion, according to the European edition of the Wall Street Journal on Tuesday.

In Germany, a spokesman for Daimler, which owns 20 percent stake of Chrysler, said the German carmaker was continuing efforts to sell its holding and welcomed any initiative that served to stabilize the situation at the U.S. carmaker.

Domestic rival BMW became the latest in a long line of manufacturers to scale back production amid a relentless rise in inventories as industry sales plummet at their fastest rate in decades, putting 26,000 German staff on shorter working hours in February and March. The Munich-based carmaker also reiterated it may apply for German government guarantees for its financing arm.

WEAKEST OF ‘BIG THREE’

The weakest of Detroit’s three car makers, Chrysler got $4 billion in U.S. government loans to avoid collapse and its chief executive said last week he was counting on $3 billion more.

Like General Motors, which also got government money, Chrysler was required to meet cost-cutting targets as a condition for the loans as well as show its plans are viable.

It also has to show it is committed to developing a new line of vehicles that produce fewer harmful emissions.

Analysts had questioned whether Chrysler could survive without a partner. Most of its sales are in the U.S. market, where Chrysler posted a 30 percent drop last year.

The Fiat deal is the latest in a series of alliances that car makers have formed over the years to cut costs and improve their profit margins.

Dutch car navigation systems company TomTom on Tuesday reflected the impact of the sharp sales decline on ancillary manufacturers as it cut its 2008 revenue and profit outlook.

By Helen Beresford and Claudia Cristoferi
(Additional reporting by David Dolan, Nathan Layne, Marcel Michelson and Gianni Montani; writing by John Stonestreet; Editing by Mike Nesbit and Dan Lalor)