Chrysler talks to others in case Feds veto Fiat deal
 

Chrysler LLC Vice Chairman and President Jim Press said the automaker is in talks with other possible partners if the U.S. Treasury Department rejects a tie-up with Fiat SpA, and defended the proposed alliance saying it would help preserve U.S. jobs.

“If it doesn’t work out with Fiat, we still have had other conversations with other potential partners and alliances and those obviously can continue, so we have other alternatives,” Press told reporters Tuesday, saying some of those talks have not been made public. “It’s a little bit like dating: nobody knows who we’re dating. We don’t need the paparazzi to follow us around and put pressure on the dates.”

Chrysler already has an alliance with Volkswagen AG to produce a minivan for VW and with Nissan Motor Co. to build a pickup for the Japanese automaker in exchange for Nissan building a small car for Chrysler.

Chrysler plans to sell a 35 percent stake to Fiat in a non-cash deal that needs Treasury Department approval under the terms of Chrysler’s $4 billion government loan. Fiat could later purchase an additional 20 percent.

“It will make the government a lot more confident that the repayment is going to occur on schedule,” Press said of a tie-up with Fiat.

He said policymakers would see the deal as a “big advantage.”

Fiat is swapping assets for equity, Press said. “They’re giving us billions and billions and billions of dollars worth of hardware,” and Chrysler gets access to small car and fuel efficient platforms.

Press said Chrysler needs another $3 billion by March 31, in line with its original $7 billion aid request in December.

“Even without Fiat, we have a good viability plan to get the balance of the $7 billion we requested,” Press said.

Press said Chrysler needs the money to operate past March, although it had some cushion if it did not receive the funds by then.

Chrysler sales chief Steven Landry said Chrysler has been reviewing what vehicles from Fiat would make sense to sell in the United States.

“By allowing us to use the capacity of North American plants to build those (Fiat) vehicles and export them, they’re preserving American jobs — a lot of American jobs,” Press said.

“It’s a lot cheaper to preserve jobs than to go out and create them… By doing that, they’re helping save the U.S. auto industry. The funds from the loans will not go to Fiat.”

Fiat has “opened all platforms and all technology to us in this partnership except for Ferrari,” Press said.

Chrysler must cut costs and streamline operations as it tries to rebound from a dramatic drop in sales amid the weak economy and prove its long-term viability. Press said January sales are about where they were last month, but the automaker had seen an increase in market share because of generous sales incentives, including zero-percent financing on some models. Chrysler was able to roll out the deals after its lending arm, Chrysler Financial LLC, got federal money to help get credit flowing.

Press said industry sales in this month remained about where they were in December, but that the company had seen an increase in market share this month.

“We’ve had an uptick in sales because of the zero program,” Press said, noting that in the wake of a $1.5 billion government loan to Chrysler Financial, the company has been able to offer zero percent financing and offer loans to customers with credit scores as low as 620.

Citi auto analyst Itay Michaeli said in a research report Tuesday that the firm still forecasts 2009 U.S. auto sales at 10.9 million units, “which would mark a modest improvement from the fourth quarter 2008 selling rate but would still amount to another down year from total 2008 sales of 13.2 million units.”

Chrysler launched its “Employee Pricing Plus-Plus” plan last week, which includes zero percent financing, and up to $6,000 cash discounts over the employee price.

So far, Chrysler Financial has financed about 5,000 vehicles this month, after getting its first $100 million in government loans.Chrysler sales fell 53 percent in December, stung by a sharp decline in lending by Chrysler Financial, which financed just 3,800 vehicles versus 50,000 in December a year earlier.

Press and Landry are holding meetings with dealers across the country urging them to order additional vehicles from Chrysler, which shut down all of its plants for at least a month on Dec. 19, drying up its revenue stream. Automakers book revenue when a vehicle leaves the factory, not when it is sold to a consumer. The executives were in the Washington area Tuesday and were headed to Atlanta next.



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