• by Karl Greenberg , January 23, 2009

Struggling automaker Chrysler is tying its fate to a company with some troubles of its own, but the Cerberus Capital-owned Chrysler is sure the two nascent allies will lift each other up by their respective bootstraps rather than pull each other down.

Chrysler's Frank Klegon, EVP/Product Development, spoke late last week about the benefits of the company's planned alliance with Fiat at the Automotive News World Conference in Detroit.

He said the deal--announced on Jan. 20--is moving fast, with Cerberus Capital and Fiat on track to finalize the global strategic union by April. The deal involves global distribution opportunities for Chrysler through Fiat channels, and U.S. market opportunities for Fiat through Chrysler's network, as well as product sharing that will benefit both companies. "We think it will enhance our product portfolio and build a long-term profitable enterprise, and preserve American jobs," said Klegon.

"It will give us access to Fiat vehicle platforms--complementing our portfolio with environmentally friendly small cars--and greatly enhance the global reach of our three brands in markets outside of North America, through Fiat's distribution organization."

Fiat reported that auto revenues dropped 21% to $7.3 billion in the fourth quarter last year from weak European sales. For its part, Chrysler said its vehicle sales outside of the U.S. dropped 10% last year. Even so, the company said its sales of 214,826 units outside North America made 2008 the second-highest sales year in a decade beyond our shores, and the third-highest annual sales volume in Chrysler International's history. In the U.S., Chrysler last year saw Chrysler, Jeep and Dodge sales drop 30% to 1,453,122 units.

The company is preparing to launch a new round of incentives, called Employee Pricing Plus Plus. The deal gives new-vehicle customers the employee price on all 2008 and 2009 Chrysler, Jeep and Dodge vehicles. The deal, which begins on January 26, also includes discounts up to $3,500 on 2009 model-year vehicles and $6,000 on 2008 model-year vehicles. Finally, the company is offering zero-percent financing up to 48 months.

The company is also offering a $1,000 consumer bonus cash on most models when financed at Chrysler Financial or a local credit union.

Klegon said the Fiat alliance is consistent with similar arrangements on a much smaller scale that Chrysler has with Volkswagen and Nissan. Chrysler makes all of Volkswagen's minivans, and Chrysler, per Klegon, will make Nissan's full-sized truck. "And this year, Nissan will start building a small car for us that we will sell in Latin America, and we will build jointly a new small car based on a Chrysler design. The key is finding mutual benefits creating value and enhancing the ability to meet the customer's needs."