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Fiat takes 35% Chrysler stake

FIAT SpA, Italy's largest car maker, agreed to take a 35-percent stake in Chrysler LLC to expand in the world's biggest auto market and give the American company access to its small-car technology.

Turin-based Fiat and Cerberus Capital Management LP, the controlling shareholder in Chrysler, the third-largest United States auto maker, signed a non-binding agreement on an alliance, they said yesterday.

Chrysler still needs US$4 billion in US federal loans intended to save it from bankruptcy and the US Treasury will need to approve the deal. Fiat, which said it won't make a cash payment and isn't committing to future funding, will provide platforms to produce fuel-efficient and small cars to be produced by Chrysler. The companies will also share distribution networks, allowing Fiat to return to the US with its main brands.

"We'll have to see how much Fiat will need to invest, but this would allow them to enter the US market as a protagonist in a forthcoming recovery with its expertise in small cars, and that's a great opportunity," Davide Manenti, head of research at Nuovi Investimenti Sim SpA in Italy, told Bloomberg News.

Fiat was suspended from trading in Milan. The stock has declined 2.4 percent this year, valuing the company at 5.38 billion euros (US$6.96 billion). Ifil SpA, the holding company that controls Fiat, rose 16 euro cents, or 7.8 percent, to 2.18 euros.

The planned partnership is consistent with the terms and conditions of the US Treasury's bailout of Chrysler and restructuring efforts agreed as part of the refinancing must still take place.

The partnership should be complete by April and will help Chrysler meet its goal of becoming viable, Chief Executive Officer Robert Nardelli said in a letter to workers.


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