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Wednesday, February 4, 2009
Fiat tie-up not only option for Chrysler
Exec says two plans to be submitted to feds for loans, but Italian automaker deal still best.

ROMULUS -- Chrysler LLC officials said Tuesday they will show the government that even without Fiat SpA, the U.S. company can survive on its own if it gets an additional $3 billion in federal aid.

But Chrysler Vice Chairman Jim Press said with Fiat in the mix it would be much more prosperous. The Auburn Hills company will submit its plan, which will include both options, to the government by Feb. 17.

The proposed deal with Fiat would give the Italian automaker an initial 35 percent equity stake in Chrysler in return for billions worth of small-vehicle and engine engineering. The tie-up is important enough that Chrysler is not speaking with any other company until the talks with Fiat are concluded, Press said in a roundtable discussion on the final stop of an eight-city tour to meet dealers.

Joint efforts already in the works with other partners such as Nissan Motor Co., which includes the Dodge Hornet derived from the Nissan Cube, are not affected, he said.

Chrysler's strategy is largely dependent on partnerships. It has product agreements with Volkswagen AG and Nissan, and technology tie-ups with General Motors Corp. and BMW AG, to name a few. Talks with Fiat are moving along well and if a deal is consummated, there could be partnership restrictions with other automakers in the future, Press said.

And while Chrysler wants the deal with Fiat to proceed, Press said "we don't have to have a partner or Fiat to gain the $3 billion." Viability will be achieved through cost-cutting and concessions from its stakeholders.

"I honestly don't see how they could be viable without a partner," said Aaron Bragman, an analyst with IHS Global Insight in Troy. "How they present (Fiat) as an option and not critical to their survival is beyond me."

Chrysler received $4 billion in loans Dec. 29 as a bridge to March 31, when it expects to receive the final $3 billion upon approval of its plan. The automaker has been submitting weekly cash reports and monthly financial updates to the government, Press said. He would not disclose the current cash position except to say it is "ample." With the full $7 billion in hand, "we will not be back" for more money, Press said, adding that a leaner Chrysler will earn its own way.

While he sees no potential for Chrysler alone, Bragman said the plan that includes Fiat is an excellent one, providing a full lineup of ready-made vehicles and more capacity for its plants. Chrysler needs Fiat to "do things Chrysler can no longer do because they've cut so far" that development is now hamstrung, he said.

Chrysler's plan is based on a vehicle sales market of 11.1 million, but also works at the 10 million mark, Press said. It works because fixed costs, capacity, fleet sales and personnel have all been slashed. The company announced Monday a new round of buyout and retirement incentives for hourly workers.

Ceasing production for at least a month helped bring dealer stocks in line, but January sales were off 55 percent and there is still a 151 days' supply.

Sales chief Steve Landry said Chrysler is making money on every car sold, even with employee prices, zero-percent financing and rebates of up to $6,000.

LINK:Fiat tie-up not only option for Chrysler | | The Detroit News
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