Fiat plans to finish its scrutiny of Chrysler ahead of the intended alliance ahead of the 17 February US government viability plan deadline but it would be at least two years after a deal was signed before its cars were built in the US, its CEO has said.
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Fiat would import its products ahead of converting a Chrysler plant for production, Sergio Marchionne told the Wall Street Journal (WSJ) in an interview, and would cover all costs to re-tool a Chrysler plant for Fiat production.
Fiat Group cars were all fully-imported when the automaker last time operated in the US. Fiat pulled out in the 1980s and Alfa Romeo in the mid-1990s.
“We would not flood the market,” Marchionne said. “We would be very selective,” he said, adding that Fiats could also be sold alongside Chrysler products in US showrooms.
The Fiat pact is critical to the viability plan Chrysler must submit to the US government by 17 February. Marchionne said Fiat was still analysing the operations of Chrysler but planned to finish the review soon so Chrysler could meet the deadline.
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By GlobalDataHe said Fiat was reviewing Chrysler’s vehicle production operations before studying its finances.
Though Fiat won’t put any cash into Chrysler, it would provide small cars and fuel-efficient engines that Chrysler needs and would cost it $3bn or more to develop on its own, he said.
Earlier announcements said Fiat was due a 35% stake in Chrysler in return but Marchionne told the WSJ his company was “not taking a dollar out of Chrysler. We’re doing this for free.”
The WSJ noted that Chrysler’s planned alliance with Fiat had raised questions about whether the federal government would, in effect, be providing aid to a foreign automaker but Marchionne said Fiat wouldn’t take any money out of Chrysler until the US government is paid back.
“If I am not comfortable that we can help Chrysler come out of this, then we won’t” provide aid, he said. “My goal is to eventually make money.”
To help make Chrysler viable, and in turn make the stake worth something, Fiat was willing to invest $3bn-$4bn of various technologies into Chrysler’s operations in coming years, Marchionne said. He added that “we are going to help them where we can operationally.”
The volume and expanded reach of a Fiat-Chrysler alliance, which would sell about 4.5m vehicles a year world-wide, would make both automakers more competitive, he said.
“We need to come up with a capital structure of Chrysler so that by the time we finish with all these gyrations, the lottery ticket delivers – we will have 35% of something that is worth something,” he said. “I don’t want to go through the next five years owning 35% of nothing. The objective here, ultimately, is to deliver value for Fiat shareholders.”
He said the company could use the alliance to sell Fiat vehicles, or other brands it owns, within a year of agreeing a deal.
Marchionne said automakers would eventually need to sell at least 5m vehicles each globally in order to survive which could lead to a wave of alliances like the one Fiat has proposed with Chrysler.
