Fiat to Buy 35 Percent Stake in Chrysler

Joshua Duval
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A flurry of rumors arose over the weekend as sources speculated that Fiat and Chrysler were close to confirming a tie-up. Today, both Fiat and Chrysler confirmed the deal, and offered up some details about the agreement.

In a joint statement, Fiat, Chrysler and Chrysler's majority shareholder, Cerberus Capital Management, said they have signed "a non-binding term sheet to establish a global strategic alliance." For Chrysler, the deal provides "access to competitive, fuel-efficient vehicle platforms, powertrains and components to be produced at Chrysler manufacturing sites." The two auto makers will also have access to each other's distribution networks.

Fiat will take a 35 percent equity stake in Chrysler, but will not provide a cash investment or commit funding to the American auto maker. Fiat vice-chairman John Elkaan told reports on Tuesday that Fiat may increase its stake at a later date. "We can raise that," he said. "It's a good deal... we have already said that it's important to have consolidation in the auto sector."

The move seems intelligent on Chrysler's part, which currently lacks a competitive small car - its Dodge Caliber has generally been derided as being subpar. Fiat, on the other hand, has enjoyed success with its Fiat 500 small car - success Chrysler is undoubtedly hoping will translate for their version if/when it comes stateside.

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