Fiat To Help Chrysler With Up To Seven New Vehicles

Fiat and Chrysler are hammering a strategic alliance involving as many as seven new models for the American marketplace.

Earlier this month Chrysler LLC and Fiat AG hammered out a working agreement or strategic alliance whereby Fiat would gain 35% ownership of Chrysler in exchange for allowing the American car manufacturer to produce a number of Fiat vehicles at Chrysler plants in North America. That deal, though not finalized yet, is shaping up to where as many as seven new vehicles from Fiat could find their way to the US market, with four vehicles sold as Chrysler branded products and the other three sporting Fiat and/or Alfa Romeo tags.

Automotive News, which has been closely following the budding relationship between the American and Italian car companies, reports that three cars are likely to fill the bottom three segments of Chrysler's car line which would include a new mini car, a subcompact and a compact model. In addition, one new model could be the next generation replacement for the Dodge Avenger and Chrysler Sebring, the midsize vehicle offerings from Chrysler.

One vehicle expected to make it to the US market is the Fiat 500, one of the most popular cars built and sold in Europe. Since being rolled out in 2008, sales have been strong for the subcompact, a car that would fit nicely in Chrysler's line up. Chrysler probably would likely tap its Toluca, Mexico plant to build the Fiat 500, a plant that currently builds its Dodge Journey crossover model and recently stopped building its now defunct Chrysler PT Cruiser. The 500 could be sold as a Fiat in the United States or branded as a Dodge. Either way, the Fiat 500 would be a highly competitive car for the domestic market.

The two companies are still working out a business plan which will hinge, in part, on federal funding. There is some backlash brewing in Congress over funding a foreign owned car company, though parent Cerberus Capital Management, LP would still have control over Chrysler LLC. Chrysler has given Fiat an option to take controlling interest in Chrysler, but that isn't likely to happen until their relationship has solidified, which could take years of work.

Alfa Romeo remains the most intriguing part of the Chrysler-Fiat deal as the Italian sports car line would be a nice addition to any Chrysler, Jeep or Dodge dealership. To that end, it appears Chrysler LLC will have some leverage with its bloated dealership network to offer these highly profitable cars to select dealers, perhaps to those who meet a certain volume criteria. It is no secret that Chrysler along with General Motors and Ford want to scale back their respective dealer networks, with Chrysler perhaps finding that only its largest and healthiest dealers should get certain models.

Ultimately, the federal government could have final say in the Chrysler-Fiat marriage as the US government holds the purse strings to keep Chrysler afloat. If funding doesn't come through, then the marriage probably will be off, further jeopardizing the future of America's third largest automaker and the tens of thousands of jobs that go with it.

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