Reaction To The Chrysler-Fiat Deal

MILAN (Reuters) – Chrysler said on Tuesday it was forming an alliance with Fiat, following reports the Italian company was to take a stake in the U.S. carmaker.

A deal would help Fiat gain the scale needed to survive the worst crisis in decades in the car industry, and help it return to the U.S. market where it has long been absent.

For Chrysler, it would allow it to expand its product portfolio to include small, less-polluting cars. Following is an initial reaction from industry analysts:


“We would consider the news a positive for Fiat as it would allow the carmaker to improve its scale, geographic reach and acquire a relatively inexpensive option on a Chrysler recovery (assuming … Fiat does not have to pay for acquiring a stake in Chrysler).”


“It is bad for Fiat.”

“Even if there is no cash injection you will spend a lot of time and money developing common platforms and then Chrysler goes bust and you have to restart from the beginning.

“It is worth nothing. Nobody would give any money for it. Maybe in two to three years time it could be worth $1-2 billion.”


“We believe Fiat is looking at Chrysler as an inexpensive way for re-enter the U.S. market, having previously discussed similiar co-operation with Ford.

“Fiat should gain access to cheap (fixed investment) U.S. assembly, as well as access to Chrysler’s U.S. distribution.

“Sharing technology should inevitably save costs.

“We are surprised by Fiat’s optimism. What Daimler or private equity could not fix is not likely to be fixed by Fiat.

“Fiat’s timing could turn out to be perfect. The fact that Fiat is not injecting cash into the deal limits its downside risk.”


“Although we believe that this move makes sense for both carmakers, we believe that Moody’s will nevertheless downgrade Fiat to sub-investment grade as any positive impact on credit ratios and growth will not be realized in the short term.

“In addition, there are some execution risks to gain synergies as can be seen by the previous example of Daimler and Chrysler.

“Nevertheless, Fiat limits its downside risks as Chrysler gets government financing and it only takes a minority stake in Chrysler and only wants to fully consolidate Chrysler if cooperation is a success and Chrysler is rescued.”

(Reporting by Gilles Castonguay, editing by Dan Lalor)