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DATE News (chronologically)
03/03/09
automotive
Fiat to Take 35% Chrysler Stake  UPDATE #3 Fiat S.p.A. CEO Sergio Marchionne is slated to travel to Washington D.C. to meet Thursday with President Barack Obama’s auto team and discuss an alliance between the Italian automaker and Chrysler LLC, which is lobbying for $5 billion more in federal loans.  Marchionne will explain how Fiat would share technology with Chrysler to give the Auburn Hills-based automaker the knowledge it needs to jumpstart its development of small cars, said Fiat spokesman Gualberto Ranieri.

Chrysler, which is already operating on $4 billion in federal loans, and Fiat in January reached a non-binding deal to form a partnership that would give Chrysler access to Fiat’s small-car technologies in exchange for a 35% stake in Chrysler.  Both companies have said that additional federal loans will be essential to the deal. Detroit Free Press

01/27/09 Fiat S.p.A. CEO Sergio Marchionne and a team of Fiat senior executives visited Chrysler LLC headquarters in Auburn Hills, Mich., on Saturday morning, according to a letter to Chrysler employees from CEO Bob Nardelli.

The Fiat team visited a display of vehicles in Chrysler's design dome and met with Nardelli; Tom LaSorda, co-president; Frank Klegon, executive vice president of product development; Frank Ewasyshyn, executive vice president of manufacturing, and other executives.

"This was a very positive meeting," Nardelli's letter said of the Fiat visit. "This potential alliance is very promising, but getting there is totally contingent on meeting the viability plan required of us by the U.S. Treasury.

"We must work even harder to find ways to reduce costs while investing in product improvements and innovation that will support our sustained viability for the long term. We're stepping up this process." AutoWeek  

01/21/09 The Italians are paying nothing -- no cash, no shares in Fiat SpA, no magnanimous offers to assume debt -- for a 35 percent stake in Chrysler LLC.

Tells you everything you need to know.

This is as sad as it is encouraging, in the sense that a reprieve from imminent execution is good news. Chrysler again is a pawn in a larger, transatlantic gambit, this one between its shadowy Wall Street owner, Cerberus Capital Management LP, and an Italian national icon, even if the alliance -- assuming it becomes reality -- appears to forestall the collapse of Detroit's smallest automaker.

For now.

"The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding in the future," says their joint statement issued Tuesday. Evidently no entity, save the federal government, is willing to pump a single dime into the automaker that says it still needs another $3 billion in bridge loans to pay its bills and survive the first quarter.

How, exactly, does this work? How does an automaker competing in a global industry, where fresh products are the lifeblood of success, keep operating and keep investing in the development of new cars and trucks when both its would-be foreign partner and its New York owner refuse to invest cash in the enterprise?

Even more, would partial foreign ownership invalidate terms of the initial bridge loans that wouldn't have been disbursed but for a last-ditch intervention by a lame-duck White House? The companies say no, but maybe so, says Rep. Barney Frank, D-Mass., chairman of the powerful House Financial Services Committee.

"It might well trigger a repayment," Frank told CNBC, referring to the Chrysler-Fiat alliance. "We put it into our bill -- and while the bill was defeated by a Senate filibuster -- the Bush administration has carried this out. We're very high in the repayment list. So, uh, depending on the deal they make it could very well trigger Chrysler having to repay the $4 billion, I think, that they got."  Detroit News

01/20/09 Fiat SpA, Italy’s largest carmaker, agreed to take a 35 percent stake in Chrysler LLC to expand in the world’s biggest auto market and give the U.S. company access to its small-car technology.

Turin-based Fiat and Cerberus Capital Management LP, the controlling shareholder in Auburn Hills, Michigan-based Chrysler, the third-largest U.S. automaker, signed a non-binding agreement on an alliance, they said in a statement today.

Chrysler still needs $4 billion in federal loans intended to save it from bankruptcy and the U.S. Treasury will need to approve the deal. Fiat, which said it won’t make a cash payment and isn’t committing to future funding, will provide platforms to produce fuel-efficient and small cars to be produced by Chrysler. The companies would also share distribution networks, allowing Fiat to return to the U.S. with its main brands. zzzz

“We’ll have to see how much Fiat will need to invest, but this would allow them to enter the U.S. market as a protagonist in a forthcoming recovery with its expertise in small cars, and that’s a great opportunity.” said Davide Manenti, head of research at Nuovi Investimenti Sim SpA in Biella, Italy.

Fiat was suspended from trading in Milan. The stock has declined 2.4 percent this year, valuing the company at 5.38 billion euros. Ifil SpA, the Agnelli-family holding company that controls Fiat, rose 16 cents, or 7.8 percent, to 2.18 euros and was priced at 2.11 euros as of 1:15 p.m. local time.

The planned partnership is consistent with the terms and conditions of the U.S. Treasury’s bailout of Chrysler and restructuring efforts agreed as part of the refinancing must still take place, the statement said. Bloomberg

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