Fiat and Chrysler

| Mon Jan. 19, 2009 10:57 PM EST

FIAT AND CHRYSLER....Today's news reports say that Fiat is planning to establish a "partnership" with Chrysler:

Under terms of a pact that is being hammered out, Fiat is likely to take a 35% stake in Chrysler by the middle of this year. It would have the option of increasing that to as much as 55%, these people said.

Fiat wouldn't immediately put cash into Chrysler, but would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S., these people said. Fiat would also provide engine and transmission technology to help Chrysler introduce new, fuel-efficient small cars, they said.

My first thought when I read this was, how did Chrysler manage to find someone dumb enough to want a stake in their company? But then I read a little more closely. Fiat isn't actually buying anything. Chrysler is apparently going to fork over a 35% stake to them in return for Fiat taking over one of its factories. It's true that that 35% stake is probably worth nothing, but unless I'm reading this wrong, Fiat is basically getting the use of a Chrysler plant for free. I guess that's not a bad deal for them.

And for Chrysler? Beats me. It's hard to believe they're really all that desperate for Fiat's engine and transmission technology, but maybe it's worth it to them just to save themselves the cost of shuttering a plant. Or something. But in any case, nobody would be dumb enough to actually invest in Chrysler, would they?

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