Fiat drives back across the pond with Chrysler link-up

"Sergio Marchionne, the Fiat chief, has found a swift response to the lonely hearts ad he took out last month," said Lex in the FT. His deal with Chrysler brings the Italian firm back to America after a 25-year hiatus. Fiat is taking a 35% stake in Chrysler, gaining access to its facilities and distribution network.

As far as the struggling US carmaker is concerned, "it should keep the blood flowing through at least some of its appendages", said John Foley on Breakingviews. Chrysler will get access to Fiat's line of small, fuel-efficient cars just about the only market that's growing at the moment. And it will also give it a better chance of securing US government aid, with Obama expected to link further funding to commitments on green technology, as Mike Ramsey pointed out on Bloomberg.com.

But this is no more than a step in the right direction for both of the groups, said Foley. Fiat's risk is capped if Chrysler "ends up on the scrapheap", said Lex; it is paying with technological know-how rather than cash. But even adding Chrysler's forecast annual sales of 1.7 million cars to its 2.2 million, Fiat falls a long way short of the six million target Marchionne reckons carmakers need to hit to make money. The deal won't do much to improve Chrysler's survival long term, industry analyst Craig Fitzgerald toldThe Guardian. It has a huge debt load, an over-reliance on its spluttering domestic market and it's burning around $50m a day, ending 2008 with just $2bn in the bank. Fiat will soon be after other partners.

Start your trial of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.