Chrysler Insists it Will Avoid Bankruptcy

March 17, 2009
Deal with Fiat should provide needed technology

The third largest U.S. automaker Chrysler insisted on March 16 the company intends to avoid bankruptcy and said a proposed deal with the Italian carmaker Fiat could be worth as much as $10 billion.

President Barack Obama's automotive task force questioned the automaker as to whether it was "viable without a global alliance partner. Our answer is absolutely yes," said Chrysler chief executive officer Robert Nardelli.

Chrysler, which has said it needs another $5 billion in emergency loans on top of the four billion awarded in December, also had the resources to survive on its own even if sales hovered in the 11.5 million to 12.6 million unit range over the next six years, he said.

"The company is well positioned for long-term viability," Nardelli said, adding that a "modest increase in sales back to the 16.8 million-unit level would allow the company to retire its debt to the U.S. Treasury by 2014."

Nardelli, who is also chairman of the ailing automaker, also said that a proposed deal with Italy's Fiat provides "significant benefits to Chrysler." The alliance, in which Fiat is to receive a 35% stake in Chrysler but provide no capital infusion, is seen as providing the troubled manufacturer with the viability plan it must submit to avert bankruptcy and meet the conditions of the four-billion-dollar U.S. government loan.

"Our viability for the long term would be enhanced even more by global strategic alliances and partnerships. The proposed Fiat alliance provides significant benefits to Chrysler," Nardelli said. "Fiat would make available to us its entire product portfolio and powertrain technology, worldwide distribution capabilities for vehicles we produce today and synergies in the areas of purchasing and engineering, among others. We estimate the cash value of Fiat's contribution to be between $8 and $10 billion considering the cost to develop these vehicles, platforms and powertrains from scratch."

"This is equal to or greater than the total amount of loans we have requested from the U.S. government. Even more importantly, Chrysler would save three to five years in development time, giving us a major competitive advantage," Nardelli said.

Copyright Agence France-Presse, 2009

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