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Fiat Group, Chrysler LLC Announce Global Alliance


 
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PostPosted: Tue Jan 20, 2009 9:51 am    Post subject: Fiat Group, Chrysler LLC Announce Global Alliance Reply with quote

Auburn Hills, Mich., Jan 20, 2009 - Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler LLC, announced today they have signed a non-binding term sheet to establish a global strategic alliance.

The alliance, to be a key element of Chrysler's viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities. In addition, Fiat would provide management services supporting Chrysler's submission of a viability plan to the U.S. Treasury as required. Fiat has been very successful in executing its own restructuring over the past several years. The alliance would also allow Fiat Group and Chrysler to take advantage of each other's distribution networks and to optimize fully their respective manufacturing footprint and global supplier base.

The proposed alliance would be consistent with the terms and conditions of the U.S. Treasury financing to Chrysler. Per the U.S. Treasury loan agreement, each constituent will be asked to contribute to Chrysler's restructuring effort including: lenders, employees, the UAW, dealers, suppliers and Chrysler Financial. Such steps would greatly contribute to Chrysler's long term viability plan. Completion of the alliance is subject to due diligence and regulatory approvals, including the U.S. Treasury.

As a consideration for Fiat Group's contribution to the alliance of strategic assets, to include: product and platform sharing, including city and compact segment vehicles, to expand Chrysler's current product portfolio; technology sharing, including fuel efficient and environmentally friendly powertrain technologies; and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America, Fiat would receive an initial 35 percent equity interest in Chrysler. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.

"This initiative represents a key milestone in the rapidly changing landscape of the automotive sector and confirms Fiat and Chrysler commitment and determination to continue to play a significant role in this global process. The agreement will offer both companies opportunities to gain access to most relevant automotive markets with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader while benefitting from additional cost synergies. The deal follows a number of targeted alliances and partnerships signed by the Fiat Group with leading carmakers and automotive suppliers over the last five years aimed at supporting the growth and volume aspirations of the partners involved," the CEO of Fiat Group, Sergio Marchionne said.

"A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits , including access to products that compliment our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and sales and marketing," said Bob Nardelli, Chairman and CEO of Chrysler LLC. "This transaction will enable Chrysler to offer a broader competitive line-up of vehicles for our dealers and customers that meet emissions and fuel efficiency standards, while adhering to conditions of the Government Loan . The partnership would also provide a return on investment for the American taxpayer by securing the long-term viability of Chrysler brands in the marketplace , sustaining future product and technology development for our country and building renewed consumer confidence, while preserving American jobs."

"This is great news for the UAW Chrysler team and we look forward to supporting and working with them to ensure Chrysler's long term viability," said Ron Gettelfinger, President United Auto Workers (UAW).

"We're on board with this important strategic initiative as it will help preserve the long-term viability of our great company, its brands and of course UAW-Chrysler jobs," said General Holiefield, Vice President, United Auto Workers (UAW).

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PostPosted: Tue Jan 20, 2009 10:02 am    Post subject: Reply with quote

To All Chrysler Stakeholders:

In our continuing effort to build a profitable enterprise for the future, we are announcing today that Cerberus, Chrysler LLC and Fiat S.p.A. have entered into a non-binding term sheet to establish a global strategic alliance. Upon completion of a due diligence process that is now underway and required approvals, the agreement is expected to be completed by April.

This represents a positive business strategy for Chrysler in today's difficult economic environment. Chrysler management believes the alliance provides significant strategic benefits that support our viability and long-term competitiveness.

As a condition of the U.S. government loan agreement, all constituents will be asked to contribute to Chrysler's restructuring effort including: lenders, employees, the UAW, dealers, suppliers and Chrysler Financial. We recognize that the financial crisis, which has brought hardship to Chrysler, has created challenges for all of our dealers, suppliers and other constituents, and we are committed to working together to find ways to support our mutual and sustained long-term viability.

This alliance would adhere to the conditions of the U.S. government loan, and help the company provide a return on investment for the American taxpayer by securing the long-term viability of Chrysler brands in the marketplace. The alliance would help sustain Chrysler's product development, manufacturing and sales operations here in the U.S., which further supports our viability plan and preserves American jobs. Our partners at the UAW have announced their endorsement of the proposed alliance.

Alliance Continues Chrysler's Aggressive Restructuring
Seeking partnerships and alliances has been a cornerstone of our recent restructuring efforts. Following the separation from Daimler in August 2007, Chrysler launched a comprehensive restructuring to address declining market conditions and transform the business into an independent American auto company, aligned with consumers' emerging needs. Since 2007, Chrysler has:

* Reduced dealer inventory by 19 percent/more than 90 thousand units
* Discontinued four vehicle models
* Eliminated 1.2 million units, or 30 percent of previously installed capacity
* Disposed of $700 million in non-earning assets
* Reduced total employment 36 percent, to its lowest level since 1934
* Reduced fixed costs by more than $2.4 billion


As a result, Chrysler began 2008 running ahead of its targets six months into a conservative plan before the unprecedented drop in vehicle sales caused by the financial crisis interrupted its business transformation. As the economy declined in late 2008, Chrysler responded quickly and aggressively to keep production and dealer inventory aligned with shrinking U.S. market demand, by making further reductions in manufacturing schedules. The extensive restructuring, cost reduction, and productivity enhancements support Chrysler's competitive position in the continuing economic downturn.

The restructuring Chrysler began in 2007 has already produced gains in new product quality and reliability. Even in the toughest automotive market in more than two decades, we continue to improve our value, safety, quality, warranty, fuel-economy and innovation for our customers. For the 2009 model year, over 88 percent of Chrysler's vehicles achieved five stars for frontal crash tests, 86 percent achieved the highest rating for side impact protection and 73 percent of our product line up offers improved fuel economy compared to last year's models.

Using Design for Six Sigma, the Company focuses on the smallest details in order to delight customers and is committed to flawless execution. A new Interior Design Studio is significantly raising the craftsmanship and improving the materials in all Chrysler interiors. The Company is also reducing complexity and engineering changes to give customers better materials without increasing costs.

Reflecting the Company's focus on designing and building in quality from the beginning, Chrysler had the industry's lowest number of recalls in 2008 as reported by NHTSA -- a total of 360,000, down from 2.2 million in 2007. In addition, internal warranty data show that Chrysler has achieved the lowest warranty claim rate in its history, with a 30 percent improvement in the last 12 months. Chrysler plans to continue to set new records, month by month, during 2009.

Benefits of Chrysler / Fiat Alliance
Under the agreement, Chrysler will have access to all Fiat group vehicle platforms, with the exception of Ferrari, which would complement our current product portfolio with fuel-efficient, environmentally-friendly small cars and powertrain technology. The alliance would greatly increase the global reach for our Jeep®, Dodge and Chrysler brands in markets outside of North America, and Fiat's distribution organization would provide Chrysler a strong partner to help build our brand's presence in important markets where we have little presence today.

Fiat would benefit from product and technology sharing as well, with access to our vehicle platforms and our manufacturing capabilities in North America. In addition, Chrysler would assist Fiat to bring their brands to the U.S. market.

Chrysler is committed to work together with our owners, lenders, employees, dealers, suppliers and Chrysler Financial to implement our viability plan fully adhering to all conditions of our government loan. Today's announcement is part of our continuing commitment to build a profitable enterprise for the future, consistent with the viability plan we submitted to congress. The agreement announced today is just the first step toward this prospective alliance, and we intend to keep all stakeholders informed of key developments on an ongoing basis.


Bob Nardelli
Chairman and CEO, Chrysler LLC

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