Chrysler presented its current model range at last month's North American International Auto Show in Detroit, included in the show line-up were several proposed electric vehicles.

Chrysler LLC, fighting for its survival, has few options other than a tie-up with Fiat, Sergio Marchionne, CEO of the Italian automaker, told the Free Press in an interview this week. “We can help them,” Marchionne said during the hour long interview at the Townsend Hotel in Birmingham. “I haven’t seen a line-up of people at the door trying to take us out of this deal,” under which Fiat would take an initial 35% stake in Chrysler and could eventually own 55% of the company.

Marchionne, who was in town with a team of about two dozen executives who are studying Chrysler’s operations as part of Fiat’s due diligence, painted a picture of a deal that is intertwined with the terms of the federal loan Chrysler has received from the U.S. government.

First, Chrysler must meet the terms of the federal loans, present a viability plan and continue to survive, ultimately to generate cash.  “It needs to stand up on its own two legs,” he said. “If it doesn’t, we won’t play.” He added that care would be taken to assure that no U.S. tax money went to Fiat.

Marchionne, who was dressed casually in a black sweater over an open-collared blue dress shirt, spoke frankly about the challenges facing this potential new alliance partner. He also referred to himself as a “blue-collar CEO” who isn’t afraid of rolling up his sleeves and stressed Fiat’s lack of bureaucracy.

While he acknowledged that the global auto market is in a dire condition – thanks to a global economy that he said has “lost all sense of normalcy” – Marchionne described his vision for a successful alliance that ultimately could link Chrysler, Fiat and a third automaker together to become a global automotive powerhouse. He said the group could sell more than 5 million cars and trucks a year. For that to be possible, however, Marchionne stressed it would take “the right level of concessions” from all the stakeholders, from the UAW to suppliers and others.

Chrysler currently is owned 80.1% by Cerberus Capital Management, a New York private equity firm that has expressed willingness to give up its stake in the automaker for concessions from bondholders and labour; and 19.9% by Daimler AG, its former German parent. Daimler has been in acrimonious talks for Cerberus to take its share.

Without Fiat – an automaker that knows what it’s like to be on the brink of disaster – there is little chance that another automaker would step in, said Marchionne, who seemed cautious but optimistic about the chances for closing the proposed Chrysler-Fiat deal. Marchionne also sought to calm fears that a foreign entity was about to take over Chrysler or take money from U.S. taxpayers. The U.S. Treasury has lent $4 billion to Chrysler and the automaker is seeking another $3-billion loan. He said there would be “no seepage of liquidity” between automakers. “Fiat will not take any cash out of Chrysler not on the basis of the deal that we structured today, and certainly not until all taxpayer funds have been repaid.”

The deal includes an option for Fiat to purchase another 20% of Chrysler for $25 million, pushing its stake to 55% in the Auburn Hills automaker. That part of the deal has drawn criticism from some in Washington. Marchionne stressed that it’s not a given that Fiat would obtain the majority stake in Chrysler. He described that scenario as being “a long way away.”

Marchionne said it could take as few as 30 months for Chrysler to make vehicles based on Fiat’s architecture. Fiat vehicles could be imported to the United States in as soon as a year. A week after Chrysler’s top executives stressed to reporters at the North American International Auto Show in Detroit that it is here to stay, Chrysler and Fiat announced the proposed deal. In return, Chrysler would have access to nearly all of Fiat’s platforms, allowing Chrysler to catch up to its domestic competitors on small cars. Both automakers would also have use of each other’s factories and dealer networks, giving Fiat the chance to return to the United States and Chrysler a badly needed global presence.

Report courtesy of Detroit Free Press