Fiat S.p.A today confirmed that it has signed a “a non-binding term sheet to establish a global strategic alliance” with Chrysler and Chrysler’s majority shareholder Cerberus Capital Management. Initial details of the alliance have been revealed. It includes Fiat taking up a 35% stake in the American automaker as well as allowing Chrysler to use “competitive and fuel-efficient” vehicle platforms, components and powertrains to be produced at Chrysler manufacturing bases.
Fiat will also allow Chrysler access to its distribution network in areas that are key for growth, and you could probably assume Chrysler would be the way for Alfa Romeo to get back into the American market. The word is that the Italian company plans to increase this 35% up to 55% over time. Fiat will also assist Chrysler with the viability plan it needs to support to the U.S. Treasury. And apparently the 35% deal does not involve any money. In return for the platforms and management consultancy help with restructuring, 35% of Chrysler will be handed over to Fiat for free.
The other two Detroit companies already have suitable platforms and powertrains to enter the European (Eastern Europe in particular) and Asian markets. GM has Daewoo while Ford has always built decent cars for the European market in the first place. This announcement fills that missing piece in the puzzle of how Chrysler plans its turnaround. It already has existing deals with Nissan mainly for Latin America, and a failed partnership with Chinese automaker Chery, but nothing like this new Fiat deal.
The last time Fiat and Chrysler had alliance talks was in the early 1990s, but that did not go anywhere, and many blame that on disagreements between Lee Iacocca and Bob Lutz, who is now at GM. Then a Chrysler exec, Bob Lutz had likened Fiat to “a bride lying on her deathbed.” Well Mr Lutz, Fiat has turned itself around and both the company you used to work for and the company you are looking for are going around asking for multi-billion dollar bail-outs.
I wonder what happened to the supposed upcoming merger between PSA Peugeot Citroen and Fiat, as reported by an Italian newspaper. Are we looking at a new PSA-Fiat-Chrysler trinity in the future?