The biggest obstacle to a Chrysler-Fiat alliance may be finding the cash to finance a potential surge of product sharing.
Analysts say a strategic partnership of Chrysler LLC and Fiat S.p.A., of Italy, makes long-term sense and would be complementary, with little geographic or product duplication. But they question both automakers' current financial reserves.
Chrysler took a $4 billion U.S. government loan this month to stave off bankruptcy and is seeking a $3 billion loan this quarter. Its plants are closed most of the first quarter.
Fiat group's 2008 net profit fell 16 percent to 1.7 billion euros ($2.2 billion). Last week Fiat lowered guidance on 2009 earnings because it expects weak auto sales. Last year Fiat's debt level rose unexpectedly to 5.9 billion euros ($7.6 billion).
Chrysler and Fiat can reduce development costs on an anticipated seven new vehicles for North America, but they still have U.S. homologation and tooling expenses, said Rebecca Lindland, a Global Insight analyst.
"Chrysler and Fiat definitely need an outside infusion of capital to make this work," she said.
Last week, Standard & Poor's announced a possible future downgrade of Fiat's credit rating, citing its growing debt burden and the industry's outlook. Fiat's current bond rating is one notch above junk status.