The Fiat Group, Chrysler and Cerberus Capital Management have announced plans for a global strategic alliance that could save the U.S carmaker and expand the Fiat Group’s global presence.
Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler, have announced a non-binding term sheet to establish a global strategic alliance.
Chrysler has witnessed Fiat’s successful turnaround over the last few years and sees an alliance with the Italian manufacturer as the best way to compete with global giants such as Renault-Nissan, GM, and Toyota. As part of Chrysler’s viability plan the alliance will provide Chrysler with access to a range of competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. In addition, Fiat will also provide distribution capabilities in previously unaddressed growth markets and management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury.
The deal does not require Fiat to put down any cash to begin with – the Italian company will receive an initial 35 percent equity interest in Chrysler for retooling a U.S Chrysler plant to produce Fiat models with the option of expanding the interest to 55 percent.
“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 benefiting 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,” the CEO of Fiat Group, Sergio Marchionne said.
“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,” said Bob Nardelli, Chairman and CEO of Chrysler LLC. “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.”
Chrysler CEO Bob Nardelli has also revealed that the next couple of years will see the addition of revised versions of the 300C, Dodge Durango SUV, and Dodge Charger saloon, amongst others, as part of the company’s renaissance.
Brand new versions of both the Dodge Durango SUV and Charger saloon will also emerge in the next couple of years as part of Chrysler’s new product offensive. This will also see in the addition of 24 new or updated models over the next 2 years, a confirmed brand new Jeep model, the next-generation Jeep Grand Cherokee, and a range of all-electric vehicles.
Nardelli also clarified arrangements pertaining to Chrysler’s alliance with Fiat.
In the letter Nardelli stated, “It is important to note that no U.S. taxpayer funds would go to Fiat the alliance is based on an exchange of equity for assets. Fiat would acquire an equity stake in Chrysler by giving us access to substantially all its vehicle platforms and technologies.
“This access is of high value to Chrysler, saving us significant costs and years of development time…throughout this process we will work with the U.S. government to ensure Chrysler meets all terms of the U.S. Treasury loan agreement, including the submission of a restructuring plan that assures Chrysler’s long-term viability, timely loan repayment and energy efficiency.”
The new alliance will reportedly see seven new vehicles introduced Stateside. Production will take place at a number of Chrysler’s idle plants and the new models will be marketed through a network of select Chrysler, Dodge and Jeep dealerships.
There will be vehicles based on four Fiat platforms, with models planned for the supermini segment right though to the compact segment. Chrysler will create a Dodge-badged minicar based on Fiat’s Panda platform, a light car and crossover based on the Fiat Grande Punto platform, and a compact car which will utilise the next-generation Alfa Romeo 147’s “C-evo” platform. The lattermost could be used as a potential replacement for the slow-selling Sebring and Avenger modes.
As part of the alliance, Chysler could also gain access to a number of Fiat Group powerplants. Fiat’s 1,4 and 1,8-litre four-cylinder direct-injection petrol engines are up for consideration, but its diesels are unlikely to emerge anytime soon due to the relatively high-expense of getting the engines to meet stricter U.S. emissions standards. In addition, Chrysler’s upcoming Phoenix V6 engine could be lent to Fiat for any larger future models.
In essence, the aforementioned moves make sense. Chrysler needs smaller, more fuel efficient vehicles – the sort at which Fiat excels. Similarly, Fiat now has the means to market its cars in the US, where many have voiced their desire for such products.