On the same day company declares it will file for bankruptcy, Chrysler confirms its alliance deal with Fiat. The Turin-based Italian automaker will provide Chrysler with models, platforms and technology in exchange for equity in the company.
Good deal or poison pill for Fiat?
On the same day that Chrysler files for Chapter 11 bankruptcy protection, with the full support and guidance of the US government, the troubled Detroit automaker announced the forging of an alliance with not-in-trouble-yet Fiat.
Fiat has decided that picking up a stake in Chrysler on the cheap is a ripe opportunity. And how cheap is that? Real cheap, as in, they don't have to shell out a dime. Fiat will provide Chrysler with models and the platforms and technology to build them, as well as management services and business cooperation in exchange for what will initially be a 20 percent stake in the company, which may be taken to 35 percent at a later date if certain conditions are met such as producing fuel-efficient vehicles at US plants and providing Chrysler access to its dealer network.
Will Fiat be able to exploit Chrysler as a low-cost manufacturing base in the US? Will they revive the Chrysler and Dodge brands and put successful models into dealerships that people will want to buy, despite the stigma of bankruptcy? That's the multi-billion dollar question.
Chrysler, and the Obama administration which has pushed the company towards a bankruptcy declaration and hopes to usher the automaker through a streamlined Chapter 11 proceeding, says it hopes to emerge from bankruptcy with the proper restructuring done within weeks. If they can pull it off maybe, just maybe, they have a chance at surviving and one day prospering again.
Fiat has laid it's bet. Good luck, Sergio.