The biggest obstacle to making the proposed Fiat-Chrysler alliance work may be finding the cash to finance a potential surge of product sharing on the North American side.
Analysts say a strategic partnership of Fiat and Chrysler 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 US government loan last month to stave off bankruptcy and is seeking a $3 billion loan this quarter. Its plants are closed most of the first quarter.
Fiat groups 2008 net profit fell 16 percent to 1.7 billion. Last month Fiat lowered guidance on 2009 earnings because it expects weak auto sales. Last year Fiats debt level rose unexpectedly to 5.9 billion euros.
Fiat and Chrysler can reduce development costs on an anticipated seven new vehicles for North America, but they still have US 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.
Fiat said it is not going to inject any cash in funding the Fiat-based vehicles Chrysler would build in North America.
Were not going to fund any of Chryslers costs, said Fiat CEO Sergio Marchionne in a conference call with analysts on January 22.