By taking a stake in Chrysler, Fiat may be providing a glimpse of the future of the auto industry, one that's a lot more global -- and where everybody scratches each other's back.
The deal, announced as a letter of intent Tuesday, is not final but would give the Italian automaker a 35% stake in Chrysler, as well as access to Chrysler's U.S. manufacturing facilities and huge distribution network.
In exchange, Chrysler would be able to sell its larger vehicles in Fiat's international dealerships and to add much-needed small, fuel-efficient cars to its fleet using Fiat's small engine and transmission technology.
As such, it's a partnership that could, in theory, lead to Italian-engineered, U.S.-built Fiats being sold as Dodges at a dealership near you, and Mexican-made Dodges sold as Fiats in France.
"I would love to sell Alfa Romeos or Fiats or Fiats badged as Dodges," said Jon Gray, owner of Orange Coast Chrysler Jeep Dodge in Costa Mesa.
The partnership is the leading example of the business model du jour in the auto industry, one in which companies trade their strengths with competitors to cover their own weaknesses in the hope that both come out stronger.
"Maybe the future for the industry consists in a series of alliances," said Thomas Klier, who, as a senior economist at the Federal Reserve Bank of Chicago, has studied the auto business for 15 years. "It has potential, but will they be able to pull it off?"
Other companies, including India's Tata Motors and Japan's Nissan Motor Co., have dipped their toes into this collaborative way of doing business. But the linkup between Fiat and Chrysler could be a crucial test of the viability of such deals because it is so ambitious. If it fails, it could further deepen the divide between niche carmakers like Fiat and global giants like Toyota Motor Corp. and Ford Motor Co.
Chrysler may have little choice. The automaker and its lending arm, Chrysler Financial, already have borrowed $5.5 billion from the federal government and are likely to seek more aid when they return to Washington in March.
By making Fiat an offer it couldn't refuse -- a 35% stake without paying a penny -- Chrysler hopes to address its most glaring problems: a lack of fuel-efficient compact and subcompact cars and an underutilized manufacturing and sales infrastructure.
It also could provide Chrysler, which sells more than 90% of its vehicles in North America, a chance to sell more cars overseas.
