Fiat and Chrysler have signed agreements to establish a global strategic alliance.

As a key part of the agreement, Fiat will acquire a 20% shareholding in Chrysler.

Almost all of Chrysler's assets will be sold into a 'NewCo' - a holding company that will operate until the start of May when a 'new' Chrysler will emerge.

The new Chrysler will be managed by a board of directors consisting of nine directors: three directors will be appointed by Fiat.

However, the deal still needs the approval of the New York bankruptcy court.

Pending this approval, the current Chrysler business will continue its normal operations and the US Treasury and the Canadian government will provide the company with financing to allow it to meet its obligations to employees and to "fund its on-going needs".

Fiat will also contribute to Chrysler rights in various platforms, technologies and models.

It will also assistant the troubled American manufacturer in key areas of its business, such as procurement and international distribution.

Fiat in return will gain access to the US markets through Chrysler's infrastructure, giving it the much sought after entry into this massive market that it has been looking for for several years.

It has already said it plans to launch the Alfa Romeo marque as well as the Fiat Cinquecento city car into the US market.

Fiat will have right to receive up to an additional 15% equity interest subject to the achievement of predetermined targets.

These include:

  • the achievement of regulatory approvals to produce Fiat's FIRE family of engines in the US;
  • achievement of sales of Chrysler vehicles outside NAFTA,
  • and achievement of regulatory approval to produce a Chrysler model based on Fiat technology.

Upon obtainment of such additional 15% interest, Fiat will also have the right to appoint another director of Chrysler.

Fiat’s shareholding will be capped at 49% until Chrysler has repaid loan granted by the US Treasury.

 

 

 

CEO of Fiat Group, Sergio Marchionne said: "This transaction represents a constructive and important solution to the problems that have plagued not just Chrysler in recent years, but the global automotive industry.

 

"Bringing together Fiat's world-class technology, platforms and powertrains for small and medium-sized cars, and its extensive distribution network in Latin America and Europe, with Chrysler's rich heritage, strong North American presence and talented and dedicated workforce, will create a powerful new automotive company, while helping preserve jobs and a manufacturing industry.

“Our goal since we first entered discussions with Chrysler nearly a year ago was to leverage the strengths of both companies to yield the scale, efficiencies and cost savings necessary to create two stronger automakers able to compete more effectively on a global scale.

Fiat must also:

  • Grant licenses enabling Chrysler to use all Fiat car platforms for the production of Chrysler vehicles in NAFTA;
  • licenses enabling Chrysler to use certain of Fiat’s other key technology, such as engine technology;
  • the on-going provision of management services in order to enable Chrysler to benefit from Fiat’s expertise in operational and industrial recovery; participation in Fiat’s purchasing and procurement programs;
  • distribution of Chrysler vehicles outside NAFTA, in particular by giving Chrysler access to Fiat’s distribution network in countries in which Chrysler currently has a limited presence.