March 17, 2009 - Chrysler - Fiat Deal, Auburn Hills MI

Chrysler Values Deal With Fiat at $10 Billion

Fiat 500 - Paris Auto Show

Chrysler's proposed partnership with Fiat could be worth as much as $10 billion to the struggling automaker by giving it a jump on developing new vehicles, Chrysler chief executive Robert L. Nardelli said in an e-mail to employees yesterday.

"This is equal to or greater than the total amount of loans we have requested from the U.S. government," he wrote. "Even more importantly, Chrysler would save three to five years in development time, giving us a major competitive advantage."

Plus, the production of Fiat vehicles in North America could boost Chrysler's plant activity, helping preserve and create more than 5,000 manufacturing jobs, he said.

Nardelli's e-mail comes as his company tries to persuade President Obama's auto task force to grant it an additional $5 billion in federal loans by the end of the month. Chrysler has already received $4 billion in loans. To strengthen its business model -- and its case for more cash -- Chrysler has agreed to give Fiat a 35 percent stake in return for the Italian automaker's fuel-efficient technology and global distribution network.

Nardelli said the deal hinges on Chrysler meeting terms that mirror those required for keeping its Treasury Department loans. Chrysler must negotiate concessions from bondholders and the United Auto Workers, such as cutting hourly wages and its cash obligation to a union-run trust for retiree health care.

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

Chrysler said it aims to finish negotiations by the March 31 deadline. Failure to reach an agreement could push the company closer to seeking bankruptcy protection. An administration official said yesterday that the government hopes to avoid bankruptcy but is leaving its options open should negotiations break down.

The auto task force has yet to approve a future Chrysler-Fiat partnership. In recent weeks, members of the panel have met with Fiat chief executive Sergio Marchionne and top Chrysler executives to assess the situation.

Nardelli sought to reassure his employees that Chrysler will continue to operate as a stand-alone company, even if it fails to partner with Fiat.

"We were asked by the task force whether Chrysler is viable without a global alliance partner," he wrote. "Our answer is absolutely yes."

Chrysler still plans to launch 24 products over the next two years, and it maintains that it will repay the Treasury loans starting in 2012, or earlier if car sales exceed the company's projections. Chrysler said it started to aggressively restructure its business in November 2007, long before its rivals did.

Nardelli said the automaker "showed clearly that with the addition of the $5 billion loan we requested, Chrysler would be able to continue paying the wages of our employees, the invoices of our suppliers, as well as investing in our future product plan."

He asked his employees to be supportive.

"At this historic time, we need all of you to support our ongoing efforts, represent our company to all interested parties and get the word out to all our local, state and federal representatives that Chrysler is a viable business on a stand-alone basis," he wrote.

Original Story - Washington Post