Fiat Group SpA, Lancia, Alfa Romeo and Fiat vehicles, including the Fiat 500, above, is trying to re-enter the U.S. market.

Fiat deal could give Chrysler a boost

DETROIT — Fiat's deal to take a 35 percent stake in Chrysler could bring badly needed small cars to the struggling U.S. automaker's showrooms, but the Italian company will not provide any immediate cash — and the help may already be too late.

For Fiat, which also makes Lancia and Alfa Romeo vehicles, the deal announced Tuesday provides ready access to Chrysler's underused factory capacity in the U.S. and an instant distribution network to re-enter the American market, something that Fiat has wanted to do for years.

Still, Chrysler faces 2009 with a critical cash shortage, limited fuel-efficient offerings, a model lineup that is not selling well and a two-year wait for the Fiat partnership to bear fruit.

"There's a substantial interim period here. You're not going to see Fiat-designed Chrysler products for at least 24 months," said Michael Robinet, vice president of global forecast services for Northville, Mich., auto consultancy CSM Worldwide.

Fiat Group SpA has far better products and is much more attractive to foreign automakers than in 2005, when General Motors Corp. paid $2 billion to get out of a partnership that could have forced it to buy the Italian company.

At that time, Fiat had $10.4 billion in debt and a lack of successful new models. But Robinet said its models are now competitive, and even though its sales are down this year, Fiat is expected to report selling just over 2 million vehicles worldwide when it releases 2008 sales figures.

"We're not talking about your grandfather's Fiat here," Robinet said. "They really are one of the premier small car builders in the world."

The deal may also help Chrysler LLC prove that it can become competitive, in order to get another $3 billion in loans from the federal government. The companies said the Fiat deal will be part of the viability plan Chrysler must submit to the Treasury Department by Feb. 17.

The department would have to approve any deal under the terms of the $4 billion it loaned to Chrysler earlier this month.

But some observers had doubts. Standard and Poor's analysts Robert Schulz and Gregg Lemos Stein cautioned investors Tuesday that a Chrysler-Fiat partnership alone was unlikely to ease Chrysler's cash crisis.

Also, if the Fiat deal goes through, foreign automakers would own roughly 55 percent of Chrysler, making aid from the federal government a bit sticky from a political standpoint.

Fiat's stake could be expanded beyond 35 percent, although Chrysler spokesman David Elshoff would not say if either company had a specific number in mind.

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