TURIN, ITALY -- Fiat S.p.A. and Chrysler LLC confirmed Tuesday that the Italian company intends to acquire an initial 35 percent stake in the U.S. carmaker.
The deal will give Fiat the scale it needs to survive, while Chrysler can expand its product portfolio to include small, less-polluting cars.
Chrysler said on Tuesday the deal, which involves no cash investment, formed a key component of plans to secure its future, and would grant it access to Fiat's more fuel-efficient vehicle platforms, engines and transmissions.
According to press reports, Fiat will have an option to boost its stake to 55 percent at a later date.
Fiat vice-chairman John Elkann told reporters on Tuesday that the Italian group could increase its Chrysler stake from 35 percent.
"We can raise that," Elkann said. "It's a good deal ... we have already said that it's important to have consolidation in the auto sector," he added.
In a joint statement, Fiat, Chrysler and Chrysler's majority shareholder Cerberus Capital Management L.P, said they have signed "a non-binding term sheet to establish a global strategic alliance."
The pact "would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrains, and components to be produced at Chrysler manufacturing sites," the companies said.
Under the terms of the deal, Fiat would make available its distribution network in key growth markets. "Substantial cost savings opportunities" would be available to the alliance, the companies said.