Italy's Fiat Says It Still Wants A Piece Of Chrysler

The Italian car manufacturer Fiat says it still wants a big piece of the troubled U.S. automaker Chrysler.

In exchange, Fiat will help the Americans build small, fuel-efficient cars. But, like all automakers, Fiat has lost sales and has its own financial troubles — and that's made the proposed deal controversial.

Fiat is not putting any cash into Chrysler, and critics worry bailout money meant for Detroit could end up going to Italy.

Fiat presents itself as Europe's most environmentally friendly automaker. Fiat, which stands for Italian Auto Factory Turin, was founded in 1899 — and it has been the pillar of Italian industry ever since. With the economic boom after WWII, the ubiquitous, tiny Fiat Cinquecento became Italians' means of social emancipation.

A 1950s commercial for the company says, "Italians can finally own a car. They no longer need to travel by bike, tram or bus." And Italian sweethearts could finally spend more time alone.

For decades, Fiat's owners, the Agnelli family, wielded inordinate economic and political power.

The company slogan could have been, "what's good for Fiat is good for Italy." But by the end of the 1990s, the company, which also owns Alfa Romeo, Lancia, Maserati and Ferrari, was in crisis.

The man credited with turning Fiat around is CEO Sergio Marchionne, hired in 2004.

"He is a very hard worker, he is a smart guy, he thinks out of the box," says automotive industry expert Pierluigi Bellini.

He says Marchionne is convinced the future of the auto sector depends on consolidation — for example between Fiat and Chrysler, which each produce just more than 2 million cars and trucks per year.

"He believes that in a few years there are going to be fewer carmakers in the world; they need to be bigger — at least 5.5 to 6 million cars and commercial vehicles all together, at least, they must make in order to survive," says Bellini.

The 56-year-old Marchionne — a trained accountant and lawyer — is a media-shy outsider. He's comfortable with the North American management and business models because he grew up and studied in Canada.

Marchionne brought Fiat back from the brink, making it a profitable European leader in compact cars — selling well in Eastern Europe and Latin America, as well as on its home turf. Yet when he unveiled Fiat's strategic alliance with Chrysler last month, the automotive world reacted with skepticism; it was seen as too bold a move by a bit player.

And some analysts believe Fiat is getting too sweet a deal by not putting any money into Chrysler.

To this, Fiat spokesman Gualberto Ranieri replies that Fiat will be providing the American carmaker with $3 billion to $4 billion worth of technology.

"Platforms, architectures and powertrain, engines and transmissions; in the smaller segments of the market, compact and sub-compact cars. And this is something that Chrysler is in need to meet what the market demands [are] in North America," he says.

Fiat says it will not get a penny of any possible U.S. government bailout funds for Chrysler, and Ranieri insists that all production will be on U.S. soil.

"These platforms and engines would be used in America, so new cars, compact and sub-compact, would be produced, made, manufactured in America," he says.

If the deal works out, Fiat would have access to Chrysler's distribution network and realize its decades-old dream to enter the large and lucrative U.S. market.

After he announced the deal, Marchionne said, "I bought a lottery ticket." It could be worthless — it depends on whether Chrysler will survive.