Fiat-Chrysler in talks over a strategic partnership
Chrysler is gearing up for another round of government financing but with a different strategy this time. To acquire government financing, the failing Detroit major has agreed to give away 35% stake to Italian automaker Fiat SpA in return for the fiat technology and expertise in manufacturing small, non/less polluting cars. No cash. Nothing. Only technical expertise. They are determined to prove that they are committed to the cause of reducing environmental pollution, which Chrysler LLC won’t be able to achieve given its technological capabilities.
If the deal gets through, then Chrysler would be manufacturing cars for Alfa-Romeo on North American soil. It already manufactures pick up trucks for Mexico-based Nissan who in turn makes small cars for it down south in Mexico. If the statistics and media reports are anything to go by, Fiat is regaining the lost grounds in Italian Auto industry and the anticipated deal will solve Chrysler’s problems to some extent. The US auto maker filed for bankruptcy three months back and has received $4 billion from the US government and hopes to receive another $3 billion more through this deal. So the deal wouldn’t really solve Chrysler’s liquidity crunch or debt problem. Cerberus Capital currently owns the ownership stake in Chrysler which it acquired in 2007 after investing about $5 billion in cash into its auto operations.
The recent collaborations Chrysler has entered into with various international auto makers increase its prospect of recovering the losses and regaining its image. From the fiat’s point of view, it will help it increase its foothold in America though it faces a strong competition from other companies, mainly VW (its European rival) and BMW.
From the Indian prospect, the deal is welcome news as fiat is already in collaboration with Tata motors here. The day isn’t far away when Tata showrooms would be retailing stylishly iconic Chrysler brands, its sedans and SUVs. According to a fiat spokesperson, this is at least not on the cards now but yes, the possibility of it cannot be denied altogether.
