Chrysler and Fiat announced Tuesday that they have signed a non-binding term sheet to establish a global strategic alliance that would give Fiat an initial 35 percent stake in Chrysler.
What does this mean? Basically, Fiat and Chrysler have signed an agreement to share technologies and vehicle platforms. Either company can get out of the agreement, but they’d have to pay any penalties involved. Also, no other companies can join into an agreement with Chrysler or Fiat right now.
Both automakers released a combined statement saying that Fiat would not invest any 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.
"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 complement our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and sales and marketing," said Bob Nardelli, chairman and CEO of Chrysler.
"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."
As we reported yesterday, Chrysler would gain from this alliance by expanding into other markets and gaining access to better products. The alliance would benefit Italian-based Fiat by allowing it to re-enter the U.S. market.