Fiat Group, Chrysler and its parent company Cerberus Capital Management last week released a joint statement announcing they had signed a non-binding term sheet to establish a global strategic alliance. The alliance, to be a key element of Chrysler’s viability plan, would provide the American carmaker with access to competitive, fuel-efficient vehicle platforms, new powertrains, and components to be produced at Chrysler manufacturing sites. Now it appears PSA Peugoet Citroen may be joining the two as well, via a merger with Fiat.
The new deal between Fiat and Peugeot is far from certain, however. A Reuters report has Fiat searching Europe to secure a credit line of up to €5 billion ($6.4 billion) to finance a takeover of Peugeot. At the same time the Agnelli family, which owns about 30% of Fiat SpA, is financing an increase in its stake to the tune of €2 billion ($2.56 billion) in order to retain a controlling stake in the merged company. Neither Fiat nor Peugeot are commenting on the matter, however. Should the three carmakers - Fiat, Chrysler and Peugeot - partner, the conglomerate would become the third largest in the global industry, behind Toyota and GM.
While the Peugeot inclusion awaits further definition, however, the Fiat-Chrysler tie-up is well underway. Per that agreement, Fiat would provide distribution capabilities in key growth markets, as well as substantial cost saving opportunities and management expertise for Chrysler in addition to givign Chrysler access to its technology and components. The alliance would essentially allow both carmakers to take advantage of each other's distribution networks and production capabilities.
Importantly, the deal would not involve Fiat making a cash investment in Chrysler or committing to funding Chrysler in the future. Instead, in return for product and platform sharing, technology sharing, and access to additional markets, Fiat would receive an initial 35% equity interest in Chrysler.
Some of the proposed benefits for Chrysler include city and compact vehicles sourced from Fiat, fuel efficient and environmentally friendly powertrain technologies, and access to distribution channels for Chrysler vehicles in markets outside of North America.
At the same time, the deal would also provide Fiat with a much-needed platform for re-entry into the U.S. market. Cars like the tremendously successful Fiat 500 and any number of Alfa Romeos could find many happy homes among U.S. buyers increasingly concerned with emissions, fuel efficiency and vehicle cost. For Fiat, however, it's not a sensible business proposition to sell those cars in the U.S. unless they are built locally.
While the Peugeot inclusion awaits further definition, however, the Fiat-Chrysler tie-up is well underway. Per that agreement, Fiat would provide distribution capabilities in key growth markets, as well as substantial cost saving opportunities and management expertise for Chrysler in addition to givign Chrysler access to its technology and components. The alliance would essentially allow both carmakers to take advantage of each other's distribution networks and production capabilities.
Importantly, the deal would not involve Fiat making a cash investment in Chrysler or committing to funding Chrysler in the future. Instead, in return for product and platform sharing, technology sharing, and access to additional markets, Fiat would receive an initial 35% equity interest in Chrysler.
Some of the proposed benefits for Chrysler include city and compact vehicles sourced from Fiat, fuel efficient and environmentally friendly powertrain technologies, and access to distribution channels for Chrysler vehicles in markets outside of North America.
At the same time, the deal would also provide Fiat with a much-needed platform for re-entry into the U.S. market. Cars like the tremendously successful Fiat 500 and any number of Alfa Romeos could find many happy homes among U.S. buyers increasingly concerned with emissions, fuel efficiency and vehicle cost. For Fiat, however, it's not a sensible business proposition to sell those cars in the U.S. unless they are built locally.
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