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Chrysler changes tune on Fiat

Backflip: Chrysler chief executive Robert Nardelli says Chrysler has a "framework of an agreement" with Fiat.

Nardelli forced to admit Chrysler tie-up with Fiat not as strong as suggested

31 Mar 2009

CHRYSLER chief executive Robert Nardelli has been forced to admit the potentially company-saving agreement with Fiat is not as strong as first indicated.

The admission came immediately after president Obama’s automotive taskforce delivered its damning reports on the viability plans submitted in February by General Motors and Chrysler.

“(The taskforce) has found that Chrysler’s plan is not viable as currently structured,” the taskforce says in its report.

“However, a partnership with another automotive company, such as Fiat or another prospective partner … could lead to a path to viability for Chrysler.” In his speech on the automotive restructuring plans, president Obama said that it was with “deep reluctance” that the taskforce had determined that Chrysler needed a partner such as Fiat to remain viable.

He gave the company 30 days to come up with a new plan and a partner if it wanted to qualify for a further $US6 billion ($A8.85 billion) in government assistance.

Mr Nardelli issued a statement soon after the president spoke, but then quickly issued a clarification of the understanding with Fiat.

He first said the three companies had reached “an agreement on an alliance”.

Only 30 minutes later, Chrysler issued another statement saying the three parties had only reached a “framework of an agreement”.

80 center imageTop: Fiat Ritmo. Below: Fiat 500 convertible.

The second statement was issued to make it clear there was still work to be done on the arrangement with Fiat, a Chrysler spokeswoman said.

“We originally had a non-binding agreement now we have an agreement on a framework. It’s like you’re dating, and then you’re going steady,” she said.

But the mix-up over the Fiat statement could not hide the bleak assessment of Chrysler’s future made by the president’s taskforce.

“The plan submitted ... reflects some progress that has been made under current management but ultimately is insufficient due to several structural issues that Chrysler, as a stand-alone entity, is highly unlikely to overcome,” the taskforce report says.

The taskforce said Chrysler did not have the scale to be able to fund the research and development needed for each of its platforms.

Besides, there were no small cars in its product pipeline and the company would struggle to meet the proposed new fuel economy standards.

The company’s quality scores “significantly lag” those of its competitors, and the company also had not invested in common architectures and flexible plant manufacturing capacity.

The taskforce also noted Chrysler’s almost complete reliance on the North American market and its lack of exposure to developing markets.

In a bid to reassure angry American taxpayers, president Obama said that any loans advanced to Chrysler would have to be repaid before Fiat would be allowed to take majority ownership in Chrysler.

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