- The Washington Times - Monday, March 16, 2009

DETROIT (AP) - If Chrysler LLC and Fiat Group SpA join forces, Chrysler would get technology and other items worth $8 billion to $10 billion, Chrysler’s chief executive said Monday.

Chrysler has a tentative deal with Fiat that would give the Italian automaker a 35 percent stake in Chrysler in exchange for mainly small-engine and small-car technology.

While Fiat wouldn’t pay any cash for its stake, CEO Bob Nardelli said in an e-mail to employees that Fiat’s contribution would be equal to or greater than the loans Chrysler is seeking from the U.S. government.

Nardelli said Chrysler is working to meet the conditions of its $4 billion federal loan and prove it deserves to get the additional $5 billion it has requested. All automakers are struggling as they try to make it through the worst U.S. sales slump in 27 years.

“Fiat would make available to us its entire product portfolio and powertrain technology, worldwide distribution capabilities for vehicles we produce today and synergies in the areas of purchasing and engineering, among others,” Nardelli wrote.

Nardelli said the terms of the Fiat deal are the same as those required by the U.S. government to get more federal loans.

Chrysler is negotiating with stakeholders, including the United Auto Workers union, for concessions that the government has specified under the loan terms. Included are parity in total labor costs with Japanese automakers with U.S. factories, swapping debt for equity in the company, and converting to equity half the $10.6 billion in payments to a union-run trust fund that will take over retiree health care costs next year.

“It is critical we meet all of our government requirements as the first step in finalizing the alliance with Fiat,” Nardelli wrote.

He also said the company would be viable without a partner, even with a conservative forecast of U.S. auto sales. Chrysler’s viability plan submitted to the government says it would have $2.9 billion in earnings before taxes this year if industrywide U.S. auto sales total 10.1 million vehicles.

Chrysler said in its plan that it lost $8 billion last year, and industry analysts have questioned whether it can stand on its own or even survive the year. The company’s sales so far this year are down 49 percent when compared with the first two months of last year. In 2008, sales fell 30 percent.

But Nardelli wrote that Chrysler intends to keep its U.S. market share at 10 percent, and since 1992, it has lost only 2.4 percentage points in share. Ford Motor Co. and General Motors Corp. have lost 45 percent of their market share during the same period, Nardelli wrote.

He said maintaining steady market share is a conservative assumption because the company plans to launch 24 new products in the next two years.

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