AUBURN HILLS, Mich. (Jan. 20, 2009) — Fiat S.p.A., Chrysler L.L.C. and Cerberus Capital Management L.P., Chrysler's private investment majority owner, have signed a non-binding term sheet to establish a global strategic alliance.
The alliance, which Chrysler said will be a key element of its viability plan, would provide the Auburn Hills-based auto maker with access to competitive, fuel-efficient vehicle platforms, powertrain and components to be produced at Chrysler manufacturing sites. Fiat also would provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities. In addition, Fiat would provide management services supporting Chrysler's submission of a viability plan to the U.S. Treasury as required.
Fiat itself has executed a restructuring plan over the past several years that Chrysler called “very successful.” The new alliance would allow Fiat Group and Chrysler to take advantage of each other´s distribution networks and to optimize fully their respective manufacturing footprint and global supplier base.
The proposed alliance would be consistent with the terms and conditions of the recent financing package from the U.S. Treasury to Chrysler. According to that loan agreement, each constituent will be asked to contribute to Chrysler's restructuring effort, including lenders, employees, the United Autoworkers (UAW) union, dealers, suppliers and Chrysler Financial. Such steps would greatly contribute to Chrysler's long term viability plan, the car company said.
Completion of the alliance is subject to due diligence and regulatory approvals, including the U.S. Treasury.
For its part, Fiat Group would receive an initial 35 percent equity interest in Chrysler. Fiat's contribution to the alliance will include product and platform sharing, including city and compact segment vehicles, to expand Chrysler's current product portfolio; technology sharing, including fuel efficient and environmentally friendly powertrain technologies; and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America.
Chrysler said the alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.
“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,” according to Sergio Marchionne, CEO of Fiat Group. “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 car makers and automotive suppliers over the last five years aimed at supporting the growth and volume aspirations of the partners involved.”
Bob Nardelli, chairman and CEO of Chrysler, 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.
“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.”
UAW President Ron Gettelfinger called the alliance “great news for the UAW Chrysler team and we look forward to supporting and working with them to ensure Chrysler´s long term viability.”
“We´re on board with this important strategic initiative as it will help preserve the long-term viability of our great company, its brands and of course UAW-Chrysler jobs,” said General Holiefield, UAW vice president.
Chrysler's 2008 total sales worldwide were 2 million vehicles. Outside of North America, the company said 2008 was the second-best sales year in the last decade and the third-best ever for Chrysler International.
Fiat, founded in 1899, is an automotive-focused industrial group serving customers in more than 190 countries worldwide. The company has about 185,000 employees, 114 R&D centers and 178 plants worldwide. The Fiat Group designs, manufactures and sells passenger cars under the Fiat, Lancia, Alfa Romeo, Abarth, Maserati and Ferrari badges, as well as agricultural and construction equipment—CNH Case New Holland—trucks and industrial vehicles under the Iveco brand, and automotive components including FPT Powertrain Technologies, Magneti Marelli and Teksid.