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Star turn as new pals hit speedbump

Backdown: Chrysler CEO Bob Nardelli has been forced to mend fences with new partner Fiat.

Chrysler forced to back down after claiming Fiat would assume debt share

24 Mar 2009

CHRYSLER and its proposed saviour Fiat were at odds late last week, with the troubled US car-maker being forced to make an embarrassing retreat from comments made by company CEO Robert Nardelli.

The Chrysler boss told CNBC that Fiat would assume 35 per cent of the Pentastar company’s debt to the US government if the Italian car-maker went ahead with its proposed alliance.

But Fiat quickly contradicted the claim, saying on Friday it would not assume any current or even future debt from Chrysler LLC if it agreed to the proposed cashless deal giving it a 35 per cent stake in exchange for access to technology, fuel-efficient vehicles and overseas markets.

“Fiat Group intends to make it absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness of Chrysler,” said Fiat in a statement.

Chrysler, which is 80.1 per cent controlled by Cerberus Capital Management, immediately reversed its stance.

“As a potential result of the ongoing discussions taking place related to the Fiat alliance, Fiat would become an equity holder with the same rights and responsibilities as all other equity holders in a newly restructured company,” Chrysler said in a statement.

“To clarify, this does not mean Fiat would assume responsibility for any of Chrysler LLC’s debt.”

Under the proposed alliance, Fiat could take up to 55 per cent of Chrysler, but the deal is dependent on the US government providing an additional $US5 billion ($A7.2 billion) in federal loans on top of the $US4 billion ($A5.7 billion) already provided to restructure the ailing Detroit car-maker.

As part of the due diligence process, Fiat is also reported to be conducting environmental and safety reviews of Chrysler’s plants to determine whether a Fiat investment would expose any liabilities for the Italian company.

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