Fiat, Chrysler To Marry

If consummated — and approved by the U.S. government — the deal would give Fiat access to the North American market. The company quit selling Fiat-brand cars here in 1983 and pulled its Alfa Romeo brand from the U.S. in 1994.

For Chrysler and its corporate parent, the private-equity firm Cerberus Capital Management, it is nothing less than a new lease on life, just a month after the automaker almost ran out of cash and teetered on the precipice of bankruptcy. Chrysler received a $4-billion government loan in early January and its financing arm received another $1.5 billion late last week. The automaker is expected to seek another $3 billion in federal loans in late March.

In effect, Cerberus is giving away one-third of Chrysler in exchange for Fiat's agreement to manage the company and provide Chrysler with access to small-car platforms and powertrains. Fiat also would distribute Chrysler vehicles in such key overseas markets as Europe and Latin America.

The Fiat-Chrysler marriage has its roots in discussions that stretch back to 1990 between Chrysler's then-Chairman Lee Iacocca and Gianni Agnelli, whose family is still a major shareholder in Fiat. Although those talks eventually petered out, Fiat later hooked up with General Motors in 2000, in an ill-starred deal that ultimately saw GM forced to pay $2 billion to buy its way out in 2005.

Last year, Chrysler and GM held deep discussions about a potential merger before a severe cash crunch forced both companies to seek a federal bailout at year end.

The German automaker Daimler, which sold a majority stake in Chrysler to Cerberus in 2007, still holds nearly 20 percent of the U.S. automaker. Daimler has indicated it wants to sell its remaining shares.

It is not clear how the Fiat-Chrysler nuptials would affect other relationships, including Fiat's alliance with India's Tata Motors and Chrysler's vehicle-sharing deal with Nissan.

Inside Line says: A Fiat-Chrysler marriage was a bad idea 20 years ago and, from our vantage point, it still looks like a bad idea. — Paul Lienert, Correspondent