TURIN -- For Chrysler LLC, the benefits of the Fiat tie-up announced early Tuesday are clear.
Chrysler gets access to Fiats competitive, fuel-efficient vehicle platforms, powertrains and components. That access will be a key element in the viability plan Chrysler has to produce next month. It also helps Chrysler to get quickly the fuel-efficient vehicles it needs to restore its competitiveness in a changing North American market.
The bigger question is: What does Fiat get out of this? In a cash-stripped automotive environment, betting even minimal cash on ailing Chrysler looks like a gamble.
The most important aspect of this tie-up from the Fiat perspective is that no cash changes hands. The Italian company will get an initial 35 percent stake in Chrysler in exchange for the intellectual property it will transfer to its new U.S. partner.
That means that, if Chrysler has to file for bankruptcy, Fiat wont be affected.
Fiats main investment in Chrysler will not be cash. It will be management time spent on helping the U.S. carmaker turn around its business.
And there is sizeable upside potential for Fiat:
First and foremost, the combined group will have a much bigger sales volume. Fiat CEO Sergio Marchionne believes annual volume of 5.5 million to 6 million units is crucial for survival in todays market. Fiat expects its 2008 sales of cars and light trucks to be 4.5 million.
Obviously, the pact will help Fiat sell more of its own models in the US. These include the Fiat 500 minicar and the Alfa Romeo range.
But other parts of the Fiat group also stand to benefit. Fiats Comau product equipment subsidiary is struggling to fill its order book. Retooling Chrysler plants to build models on Fiat platforms will help.
As part of the plan, Chrysler will begin making hundreds of thousands of Fiat-based engines in North America. A big beneficiary will be Fiats Teksid metallurgical subsidiary, which already has a strong footprint in North America.
Planned new Chrysler vehicles will provide business for Fiat groups components division, Magneti Marelli, which is strong in Europe, but not a mayor player in North America yet.
In many ways, a combined Fiat and Chrysler fits perfectly with Marchionnes view of the rapidly changing global auto industry.