Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler LLC, have signed a non-binding term sheet to establish a global strategic alliance that will result in Fiat having a 35% stake in the Detroit-based automaker.
As a consideration for Fiat Group’s contribution to the alliance of strategic assets, to 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, Fiat would receive an initial 35% equity interest in Chrysler. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.
The alliance, to be a key element of Chrysler’s viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also 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 US Treasury as required. Fiat has executed its own restructuring over the past several years. The new partners say that the alliance would also 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 US Treasury financing to Chrysler. Per the US Treasury loan agreement, each constituent will be asked to contribute to Chrysler’s restructuring effort including: lenders, employees, the UAW, dealers, suppliers and Chrysler Financial. Completion of the alliance is subject to due diligence and regulatory approvals, including the US Treasury.
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 benefitting from additional cost synergies.—Sergio Marchionne, CEO of Fiat Group