Sources: Chrysler-Fiat Partnership At Hand

Deal With Italian Automaker Would Complete Huge Restructuring Plan To Keep Chrysler Alive

(AP)  Italian automaker Fiat Group SpA will sign paperwork to become a partner with Chrysler LLC by Thursday, according to three people briefed on the deal.

The partnership is the last piece of a huge restructuring plan needed to keep Chrysler alive as it approaches Thursday's government deadline to cut labor costs, slash debt and take on a partner.

The people said Wednesday that despite the partnership, Chrysler could still wind up under Chapter 11 bankruptcy protection for a short time if some creditors don't agree to reduce their debt. But they said the government would agree to finance the restructuring rather than cut off Chrysler's aid and leave it destined for liquidation.

All of the people spoke on condition of anonymity because the partnership agreement had not been announced.

One of the people said Fiat initially would take a 20 percent stake in the company in exchange for its small-car and engine technology. Initially Fiat would not invest any cash, but its technology is worth $8 billion to $10 billion, the person said.

Fiat's stake could rise to 35 percent, and the company may be willing to invest money at a later date, the person said.

President Barack Obama, speaking at a town-hall style event near St. Louis, said earlier Wednesday that he didn't know if a deal to save Chrysler would be completed.

"We're hoping that you can get a merger where the taxpayers will put in some money to sweeten the deal but, ultimately, the goal is we get out of the business of building cars, and Chrysler goes and starts creating the cars that consumers want," he said.

Chrysler has borrowed $4 billion from the government since the beginning of the year and could soon be in danger of running out of cash without more help. The government in March rejected Chrysler's restructuring plan and gave it 30 days to make another effort.

On Sunday, the Canadian Auto Workers ratified concessions to the automaker, and the United Auto Workers in the U.S. reached a tentative cost-cutting deal that members will finish voting on by Wednesday night. Factory-level union leaders voted unanimously Monday night to recommend approval of the concessions.

Then on Tuesday, four major banks that hold 70 percent of Chrysler's $6.9 billion in secured debt agreed to a deal that would erase the debt for $2 billion in cash. But 46 hedge funds that hold the remainder of the debt have refused to go along, leading to further negotiations.

The people familiar with the deal said that if the hedge funds don't agree, Chrysler could go into a short "surgical" bankruptcy under Section 363 of the bankruptcy code. The smaller lenders would have little power to stop the debt from being restructured in bankruptcy court, since the lenders holding the majority of the debt are on board with the plan, the people said.

If an agreement is reached, Chrysler would restructure outside of bankruptcy with government help, they said.

Fiat spokesman Gualberto Ranieri declined to comment on the deal, and messages were left with a Chrysler spokeswoman.

UAW members are expected to approve the contract concessions, which include taking a 55 percent stake in Chrysler in exchange for about $6 billion of the $10.6 billion Chrysler must pay into a union-run trust that will take over retiree health care costs.

With union issues nearly out of the way and the debt resolved either in or out of court, Fiat agreed to cement the partnership with Chrysler, the people said.

"It'll be signed by tomorrow, I know that," one of the people told The Associated Press.

[tmittelstaed]

"...This is so stupid!! Why is it necessary to go to another countries company? Why not our own USA company unite?..."

Uh, did you miss where the article said:

"...UAW members are expected to approve the contract concessions, which include taking a 55 percent stake in Chrysler..."

What in the frack do you think IS happening? Chrysler is going to be owned by the UAW and you can't get much more American than that!!!

Think about it. None of the automakers who have a good presence in the US market want Chrysler around. There's a solid market of new car buyers who want to Buy American, you might even be one of them. They will buy either Ford, GM or Chrysler, nothing else. If Chrysler disappears, then their choice is either Ford or GM, so why would Ford or GM want to spend money on Chrysler?

Open your phone book yellow pages and count the number of Dodge/Jeep/Chrysler dealers in your city. Now, count the number of Fiat dealers. That should make it obvious that Fiat wants Chryslers dealer network much more than Chryslers cars.

When Daimler owned Chrysler, it was terrified of Chrysler cutting into it's European business so it didn't let Chrysler sell it's cars through Daimler's Mercedes dealerships in Europe even though Mercedes are one of the biggest POS cars in existence. So it was no wonder that Daimler sold Chrysler to Cerberus AKA strip-n-flip. Of course, Cerberus didn't know squat about owning an automaker and by the time they figured anything out, the recession hit. When the US bailed out Chrysler, Cerberus was bought out by the US which was one of the first smart moves in a long time. Now, the US is turning the company over to the UAW's pension fund, so the UAW ends up owning Chrysler which is what should have happened back in 2007 when Daimler sold out.

When this is all said and done, Chrysler will be the MOST american auto company of the big 3!! Fiat and Chrysler are just going to be exchanging technology which is no different than what Chrysler and Mitsubishi did 10 years ago, and they will be selling each other's cars
in each other's dealer networks. It's a darn good deal.

If anything, the company with the most to lose here is GM. Chrysler has a d a m n good vehicle lineup, they also have Dodge and Jeep. And they aren't saddled with money-losing brands like Pontiac or Saturn.

Sure, people can go buy Toyota for all they want. But I got news for you, Toyota ain't giving away their cars for free. In this recession economy, buyers are a heck of a lot more careful than they used to be. You can count on the UAW doing whatever it takes to sell Chrysler cars now that they own the company. And if that means cutting vehicle prices to undercut Toyota, and then taking pay cuts to support the price cutting, that's what they will do. Toyota can't do that, and they have their own problems too - they fired their president, and just lost $5 billion USD. And it was just reported the Honda Insight outsold the Prius in the UK for the first month it was offered, and Toyota is still dragging it's feet on a plug-in Prius, the new 3rd gen Prius coming out this summer won't have plug-in.

[start99]

This is so stupid!! Why is it necessary to go to another countries company? Why not our own USA company unite? Whats wrong with this country?

[jonesjep]

Two crap automakers, joining forces under the intelligent leadership of the UAW and the US Federal Government,........why wait...just lock the doors and cut out the lights now. If it makes you Libs feel better the lights being out will reduce CO2.

[Henri_Rochard]

FIAT !!!

Fix It Again, Tony !!!

[tomanyt]

Sure hope they bring the 500 to the US,

[brianp55]

Just who is going to buy a car produced jointly by Chrysler and Fiat? Let's see...I really need to buy a car and I can get a Honda or a Toyota...nope, I'm gonna get that new Chrysler-Fiat vehicle because I want it to last. Walter Chrysler is probably spining in his grave.