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Chrysler Gains Seven Models from Fiat Alliance

Posted Today 07:20 AM

Chrysler Gains Seven Models from Fiat Alliance

Speculation has run rampant about Chrysler's future lineup for months now, and has only increased since the struggling American carmaker announced its plans to tie-up with Italian automaker Fiat. That speculation gets a new focus today, as Automotive News is revealing some details about the vehicles that will be born out of the alliance.

Chrysler badly needs to fill its voids in small car segments. To address this issue, Chrysler will retool its Toluca, Mexico plant-which currently builds the Dodge Journey and Chrysler PT Cruiser-to start building the Fiat 500 minicar. Chrysler will also sell a version of the Fiat Panda 5-door mini hatchback, likely with a Chrysler or Dodge badge on it. The Fiat Panda and Fiat 500 are the best-selling and second-best-selling small cars in Europe. The 500 could be sold as soon as 2012.

Fiat will supply Chrysler with two subcompacts, another segment in which Chrysler has no presence. The Alfa Romeo MiTo will be sold, along with a Chrysler or Dodge vehicle based on the same platform. Chrysler will also have access to Fiat's 1.4-liter and 1.8-liter four-cylinder engines to power these small cars. Chrysler's smallest engine right now is a 2.5-liter four-cylinder.

In the compact segment, Chrysler's offerings are notoriously sub-par: the Dodge Caliber, Jeep Compass and Jeep Patriot. Fiat's upcoming C-Evo platform, which will spawn a successor for the Alfa Romeo 147 to be sold in the U.S., may also be used to build a replacement for the Dodge Caliber. Both vehicles will be built at a U.S. plant. The Jeeps are likely to be killed off.

Chrysler's mid-sized sedans, the Chrysler Sebring and Dodge Avenger, have also been criticized as disappointing and lackluster. A redesigned Sebring/Avenger could be built upon a stretched version of the C-Evo platform. Fiat hasn't decided what it will use the stretched C-Evo platform for, so the Chrysler mid-sized sedans would be its first application.

Fiat may sell the Journey and Dodge Dakota in Latin America, as well. Its main benefit in the deal with Chrysler is cheap manufacturing and distribution in the North American market. Fiat has had no presence in the U.S. since Alfa Romeo withdrew in the mid-1990s. It will also gain access to Chrysler's upcoming Phoenix V-6 engines.

The two automakers hope to have the proposed alliance deal finalized by April 30.

Chrysler Gains Seven Models from Fiat Alliance ? Automotive News & Car Rumors at Automobile Magazine

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Chrysler talks to others in case Feds veto Fiat deal

Tuesday, January 27, 2009

Chrysler talks to others in case Feds veto Fiat deal

LINTHICUM HEIGHTS, Md . -- Chrysler LLC Vice Chairman and President Jim Press said the automaker is in talks with other possible partners if the U.S. Treasury Department rejects a tie-up with Fiat SpA, and defended the proposed alliance saying it would help preserve U.S. jobs.

"If it doesn't work out with Fiat, we still have had other conversations with other potential partners and alliances and those obviously can continue, so we have other alternatives," Press told reporters Tuesday, saying some of those talks have not been made public. "It's a little bit like dating: nobody knows who we're dating. We don't need the paparazzi to follow us around and put pressure on the dates."

Chrysler already has an alliance with Volkswagen AG to produce a minivan for VW and with Nissan Motor Co. to build a pickup for the Japanese automaker in exchange for Nissan building a small car for Chrysler.

Chrysler plans to sell a 35 percent stake to Fiat in a non-cash deal that needs Treasury Department approval under the terms of Chrysler's $4 billion government loan. Fiat could later purchase an additional 20 percent.

"It will make the government a lot more confident that the repayment is going to occur on schedule," Press said of a tie-up with Fiat.

He said policymakers would see the deal as a "big advantage."

Fiat is swapping assets for equity, Press said. "They're giving us billions and billions and billions of dollars worth of hardware," and Chrysler gets access to small car and fuel efficient platforms.

Press said Chrysler needs another $3 billion by March 31, in line with its original $7 billion aid request in December.

"Even without Fiat, we have a good viability plan to get the balance of the $7 billion we requested," Press said.

Press said Chrysler needs the money to operate past March, although it had some cushion if it did not receive the funds by then.

Chrysler sales chief Steven Landry said Chrysler has been reviewing what vehicles from Fiat would make sense to sell in the United States.

"By allowing us to use the capacity of North American plants to build those (Fiat) vehicles and export them, they're preserving American jobs -- a lot of American jobs," Press said.

"It's a lot cheaper to preserve jobs than to go out and create them... By doing that, they're helping save the U.S. auto industry. The funds from the loans will not go to Fiat."

Fiat has "opened all platforms and all technology to us in this partnership except for Ferrari," Press said.

Chrysler must cut costs and streamline operations as it tries to rebound from a dramatic drop in sales amid the weak economy and prove its long-term viability. Press said January sales are about where they were last month, but the automaker had seen an increase in market share because of generous sales incentives, including zero-percent financing on some models. Chrysler was able to roll out the deals after its lending arm, Chrysler Financial LLC, got federal money to help get credit flowing.

Press said industry sales in this month remained about where they were in December, but that the company had seen an increase in market share this month.

"We've had an uptick in sales because of the zero program," Press said, noting that in the wake of a $1.5 billion government loan to Chrysler Financial, the company has been able to offer zero percent financing and offer loans to customers with credit scores as low as 620.

Citi auto analyst Itay Michaeli said in a research report Tuesday that the firm still forecasts 2009 U.S. auto sales at 10.9 million units, "which would mark a modest improvement from the fourth quarter 2008 selling rate but would still amount to another down year from total 2008 sales of 13.2 million units."

Chrysler launched its "Employee Pricing Plus-Plus" plan last week, which includes zero percent financing, and up to $6,000 cash discounts over the employee price.

So far, Chrysler Financial has financed about 5,000 vehicles this month, after getting its first $100 million in government loans.Chrysler sales fell 53 percent in December, stung by a sharp decline in lending by Chrysler Financial, which financed just 3,800 vehicles versus 50,000 in December a year earlier.

Press and Landry are holding meetings with dealers across the country urging them to order additional vehicles from Chrysler, which shut down all of its plants for at least a month on Dec. 19, drying up its revenue stream. Automakers book revenue when a vehicle leaves the factory, not when it is sold to a consumer. The executives were in the Washington area Tuesday and were headed to Atlanta next.

LINK:Chrysler talks to others in case Feds veto Fiat deal | | The Detroit News

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Fiat has plans for Chrysler

Fiat has plans for Chrysler, but nothing magical

Sunday, February 8, 2009

DETROIT - The last two times Chrysler was sold - to Daimler-Benz in 1998 and to Cerberus Capital Management in 2007 - its new owners promised nothing less than a remarkable renaissance for the smallest of Detroit's Big Three automakers.

But Sergio Marchionne, the chief executive of the Fiat Group, the Italian carmaker, has no such grand visions for his company's prospective alliance with Chrysler. His company's plan to take a 35 percent stake in Chrysler is accompanied by a blunt assessment of its prospects.

"I think Chrysler has all the prerequisites to survive," Marchionne said last week. "But the bigger issue is, what does it look like two or three years from now? It's not as if Fiat is going to show up and Cinderella is going to be magically turned into something else."

Chrysler has been struggling to avoid bankruptcy since last year, when it joined General Motors in asking for federal aid to make it through the worst downturn in the U.S. auto industry in more than 25 years.

Chrysler has received $4 billion in government loans, and is counting on getting an additional $3 billion by April to stay in business. GM has gotten $9.4 billion and expects an additional $4 billion as well.

But before either company can receive more government money, they must prove they are taking steps to cut labor costs, reduce debt and downsize operations. The Treasury Department has set a Feb. 17 deadline for GM and Chrysler to show their plans to become financially viable.

For Chrysler, its deal with Fiat - announced last month - is the linchpin of its turnaround effort.

In exchange for a 35 percent stake, Fiat will let Chrysler build small cars using a number of its "platforms" - the automobile industry term for the mechanical underpinnings of a vehicle, including engines - so that Chrysler can broaden its lineup beyond large pickups, SUVs and minivans. This current mix is one reason Chrysler's sales have fallen so quickly over the last year.

The deal will also allow Fiat to re-enter the American market, from which it withdrew in 1984, and to eventually build Fiat and Chrysler models together on assembly lines in the United States and Europe.

The talks between Chrysler and Fiat started last summer when it completed a deal to buy a Chrysler engine plant in Brazil.

Marchionne, Fiat's chief executive since 2004, said he had no designs to become involved with Chrysler on more than just a small scale.

But after initial discussions with Thomas W. LaSorda, a Chrysler vice chairman, Marchionne said he started seeing a Chrysler-Fiat alliance as a logical combination for both parties.

"We're not doing this because we're good Samaritans," Marchionne said. "We're willing to take a risk on investing technology and time to help Chrysler come back to life and bring value to Fiat shareholders."

After meeting recently with Chrysler executives at company headquarters in suburban Detroit, Marchionne offered a utilitarian appraisal of how the two automakers could help each other.

"We have to get back to being metal bashers," he said. "We need to go back to some simple rules of making and selling cars."

Marchionne has taken just such a basic approach to remaking Fiat from a bloated conglomerate into a leaner, more focused competitor in the European auto market.

Previously head of the Swiss industrial testing company SGS Group, he was recruited by members of Fiat's founding Agnelli family to shake up the auto company. Marchionne promptly unwound an unsuccessful alliance with GM, and divested the company of airline, insurance and banking divisions that he said had distracted Fiat from the car business.

An outsider in the clubby Italian business establishment, Marchionne is plain-spoken and informal. Instead of suits, he favors open-collared shirts and cashmere sweaters. He unapologetically conducts interviews while smoking his way through a pack of Marlboro cigarettes.

He sees Chrysler's problems - too much capacity, no access to capital, a need for more fuelefficient vehicles - as symptoms of an industrywide illness.

"We all have to do the restructuring that is needed, no matter how painful," he said. "We have to be willing to restructure to make sure that we can sell what we build."

With the right products, he said, Chrysler could make money on its 11 percent share of the U.S. market, even if industry sales remained depressed.

Analysts say they think that Fiat's small-car expertise could at least give Chrysler the opportunity to make a transition from its dependence on larger vehicles.

"Fiat's inclusion into the future equation allows Chrysler a technology and economiesof-scale lifeline," said Michael Robinet, head of global vehicle forecasts for CSM Worldwide. "But other daunting challenges remain."

Fiat itself is profitable, but the company has made no commitment to put cash into Chrysler. Instead, Fiat will offer vehicle platforms that Chrysler can modify with its own designs and interiors to appeal to fuel-conscious American consumers.

Industry observers who were ready to write Chrysler off as a lost cause see Marchionne's back-to-basics approach as its only hope.

"He appears to have done a remarkable job in getting Fiat's quality and sales back up," said Jerome York, a former Chrysler executive who has advised the billionaire Kirk Kerkorian on his investments in the auto industry.

But it will take at least two years before Fiat cars can be remade into Chrysler models. Marchionne sidestepped questions on whether an additional $3 billion in government loans would be enough to keep the company solvent until then.

He said that it was "up to Chrysler" to negotiate lower labor costs with the United Automobile Workers and to shrink its debt to qualify for more loans.

And Marchionne is unfazed by some in Congress who question whether American taxpayers should lend more money to Chrysler if it benefits a foreign automaker. :: Northwest Arkansas' News Source
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