That was quick. Just hours after the Obama administration gave Chrysler owner Cerberus Capital Management 30 days to complete a tie-up with Italian auto maker Fiat SPA, Cerberus says it has reached a deal for a “global alliance” with Fiat. Chrysler says the deal should allow it to pay back government loans sooner and preserve U.S. jobs.
The alliance may allow Chrysler to tap into as much as $6 billion in new equity financing from the government.The details of the alliance haven’t been announced yet. This is more of a “framework” for the deal that they will have to complete within 30 days to meet the government deadline.
Earlier today the industry paper Automotive News reporting that, according to people familiar to the matter, the Obama administration was pushing to keep the stake of Fiat low, perhaps as low as 20 per cent. When the two automakers first announced a possible alliance, they discussed giving Fiat at a 35 per cent stake that could rise to to 55 percen.
“As part of the proposed alliance, Chrysler will get access to Fiat’s small-car technology. Sources say that Fiat would be allowed to increase its 20 per cent Chrysler stake to 35 per cent as the Italian automaker transfers its platform and powertrain technologies to the United States,” Automotive News reported.
If Chrylser does tap the government for additional funding, it will likely increase calls for greater disclosure about the private equity investors in Cerberus.
Here’s the Chrysler press release:
AUBURN HILLS, Mich., March 30 /PRNewswire/ — Today marks an important milestone for Chrysler LLC. We are encouraged by the commitments of the Administration, U.S. Treasury and President’s Auto Task Force to the American automobile industry and Chrysler’s viability, with a Fiat alliance.
We are pleased that Chrysler, Fiat and Cerberus have reached agreement on a global alliance, supported by the U.S. Treasury. Chrysler has consistently said that the alliance with Fiat enhances its business model that expands its global competitiveness. We appreciate the willingness of the Task Force, along with industry and financial experts, to consult closely with us in order to achieve this significant step.
By providing Chrysler with product and platforms, technology cooperation and global distribution, Fiat strengthens Chrysler’s ability to create and preserve U.S. jobs; gives U.S. consumers more choices for environmentally advanced vehicles; gives its dealers more of the products they need to be successful; helps stabilise the supplier base; and allows Chrysler to pay back government loans sooner.
Chrysler has had a series of very constructive discussions since our plan was submitted February 17, including weekly face-to-face meetings with the Task Force. We have been impressed by their speed, diligence, good faith and strong grasp of the difficult issues our industry faces in this financial crisis. This is evidenced by the U.S. government’s initiatives to support consumer warranties and suppliers, as well as their appointment of Dr. Edward Montgomery, Director of Auto Recovery.
I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ‘business as usual’ over the next 30 days. While we recognise that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.
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