Fiat buys 35% of Chrysler

CARS - Fiat and Chrysler announced today that they have signed a nonbinding agreement for a strategic alliance that would give the Italian auto empire a 35% stake in Chrysler, which is currently facing huge financial woes. The alliance is subject to regulatory approvals.

The two companies said in a joint statement they would share technologies and vehicle platforms. Under the proposed alliance, Fiat would not invest cash in Chrysler but would provide access to its successful small-car platforms, as well as to its more environmentally friendly and fuel-efficient engines.

The statement said Fiat would take an "initial" 35% stake, suggesting the deal may be broadened. It stressed that under the agreement the company is not committing to funding Chrysler in the future.

Chrysler, which is currently 80.1% owned by Cerberus Capital Management LLP, has been hurt by its reliance upon slow-selling trucks and sport utility vehicles and analysts have said it may not survive 2009 as an independent company despite receiving the $4 billion government loan.

The US Treasury Department said Friday it will provide a $1.5 billion loan to Chrysler's financing arm, Chrysler Financial, and the automaker plans to offer zero-percent financing on several models and expand lending to car buyers with less than ideal credit. The move is considered highly risky by critics.

Fiat Group SpA, which makes Fiat, Lancia and Alfa Romeo vehicles, is trying to re-enter the United States market. The company has expressed interest in bringing its Fiat 500 compact car and the Alfa Romeo brand to the United States. (Alfa Romeo's are considered by many car enthusiasts to be the most beautiful cars ever made.)

A prediction of the future? If Chrysler can get over the American recession then Chrysler cars will become more beautiful to look at, more fuel efficient... and finally profitable to build and sell.