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Chrysler has struck an agreement with the Italian carmaker Fiat. Under this deal, Fiat would acquire a big chunk of the U.S. automaker, and in exchange, help Chrysler build small, fuel-efficient cars. NPR's Sylvia Poggioli reports.

SYLVIA POGGIOLI: Today, Fiat presents itself as Europe's most environmentally friendly automaker.

(Soundbite of TV advertisement)

Unidentified Man #1: We've always make compact, practical and economical cars. We're proud to have the lowest average CO2 emissions of any car manufacturer in Europe.

POGGIOLI: Fiat, which stands for Italian Auto Factory Turin, was founded in 1899. And it's been the pillar of Italian industry ever since. With the economic boom after World War II, the ubiquitous, tiny Fiat Cinquecento became Italians' means of social emancipation.

(Soundbite of TV advertisement)

Unidentified Man #2: (Italian spoken)

POGGIOLI: This 1950s commercial 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's 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 and Lancia and luxury sports cars Maserati and Ferrari - was in crisis. The man credited with turning Fiat around is CEO Sergio Marchionne, hired in 2004.

Mr. PIERLUIGI BELLINI (Automotive Industry Expert): He's a very hard worker. He is a smart guy. He thinks out of the box.

POGGIOLI: Automotive industry expert Pierluigi Bellini says Marchionne is convinced the future of the auto sector depends on consolidation, for example, between Fiat and Chrysler, which each produced just more than two million cars and trucks per year.

Mr. BELLINI: He believes that in a few years, there's going to be fewer carmakers in the world. They need to be bigger. He say there must be at least 5.5, six million cars and commercial vehicles altogether, at least, they must make to be able to survive.

POGGIOLI: 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.

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

Mr. GUALBERTO RANIERI (Fiat Spokesman): Platforms, architectures and powertrain engines and transmissions in the smaller segments of the market, and so for compact and subcompact cars. And this is something that Chrysler is in need to meet both the market demand in North America (unintelligible).

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

Mr. RANIERI: These platforms and engines would be obviously used in North America. So the new cars, the new compact and subcompact cars will be produced and made, manufactured in North America.

POGGIOLI: 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.

Sylvia Poggioli, NPR News, Rome.

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