Fiat 500 Abarath SS

Ferrari's upcoming "California" 2009 model  (Source:

Chrysler Sebring

Dodge Caliber
New partnership between Chrysler and Fiat could bring both sports and compact expertise to Chrysler

Chrysler has seen its share of tough times.  First it was bought by German company Daimler, after falling behind its competitors GM and Ford.  Then the Daimler-Chrysler relationship disintegrated and Daimler sold Chrysler to a holding company.  Chrysler already filed Chapter 11 once, and there was recent talk of a second bankruptcy.

However, with the auto bailout package passed and Chrysler receiving essential loan money, it’s determined to turn around and regain an advantage on its publicly owned domestic competitors GM and Ford.  Today it announced a big new partnership that will take many by surprise.  Chrysler is pairing up with Fiat.

Fiat, known dually for its performance brands -- Maserati, Ferrari, and Alfa Romeo -- also has some of the world's best compact cars, like the Fiat 500, akin to a curvier Mini Cooper.  Fiat is actually buying part of Chrysler, gaining a 35 percent equity stake.  In return, Fiat will lend its energy expertise in developing fuel efficient and performance cars to Chrysler and will send staff to Chrysler's plants.  It will also help Chrysler prepare its turnaround plan to present to the U.S. Treasury.

While on the surface it seems strange for Fiat to invest in Chrysler, while auto sales slump worldwide and brands like GM are seeking to divest their interest in subsidiaries like Saab, deeper down the move makes a lot of sense.  Fiat already went through its own restructuring, after being hurt by sinking world auto sales.  It came out of the restructure stronger and more competitive, something Chrysler wants to do.

Further, Chrysler needs small car expertise to develop new fuel efficient compacts.  Fiat can certainly provide this, and will perhaps provide Chrysler with ways to improve upon its upcoming electric offerings as well.  A partnership with Fiat also gives Chrysler access to some of the world's hottest sports car technology.  Fiat production will also move into Chrysler factories, many of which are idle.  This will save both companies a great deal of money.

For Fiat, it means that it can perhaps offer its best-selling Fiat 500 compact in the U.S. sooner than the anticipated late 2010 target date.  At the very least, it gains a significant manufacturing presence to help push plenty of the compact onto the efficiency-craving portion of the American market.  Also, pairing with Chrysler gives Fiat a way to launch cars bearing the Chrysler name, which will appeal to those in the U.S. who only buy domestic.  According to reports, the Fiat 500 may indeed launch under a separate brand and name, made especially for the U.S.

Bob Nardelli, Chairman and CEO of Chrysler LLC cheered the transaction stating, "A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits, including access to products that compliment our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and sales and marketing.

This transaction will enable Chrysler to offer a broader competitive line-up of vehicles for our dealers and customers that meet emissions and fuel efficiency standards, while adhering to conditions of the Government Loan. The partnership would also provide a return on investment for the American taxpayer by securing the long-term viability of Chrysler brands in the marketplace, sustaining future product and technology development for our country and building renewed consumer confidence, while preserving American jobs."

Sergio Marchionne, CEO of Fiat Group added, "This initiative represents a key milestone in the rapidly changing landscape of the automotive sector and confirms Fiat and Chrysler commitment and determination to continue to play a significant role in this global process. The agreement will offer both companies opportunities to gain access to most relevant automotive markets with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader while benefitting from additional cost synergies."

"The deal follows a number of targeted alliances and partnerships signed by the Fiat Group with leading carmakers and automotive suppliers over the last five years aimed at supporting the growth and volume aspirations of the partners involved."

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