Fiat courts Chrysler for a US comeback

Lost in the coverage of the Obama Inauguration was this little story, that Italian automaker Fiat has signed an initial agreement to take a 35% share of struggling US automaker Chrysler. Fiat is paying Chrysler nothing to acquire more than a third of their company, in fact if you're a US taxpayer, you'll help Fiat take over a chunk of Chrysler - one condition of the deal is that Chrysler first get another $3 billion in bailout money from Congress before Fiat takes their share of the company.

The logic behind the deal is that it will give Chrysler access to new markets where Fiat is big, like Europe. Fiat, meanwhile, will use Chrysler's technology and manufacturing plants here to make a return to the American market. For the most part Fiat hasn't been active in the United States for a quarter of a century, and Fiats have a generally lousy reputation here - the old joke is that ‘Fiat’ is an acronym for: “Fix It Again, Tony.”

But Fiat thinks the time is right for a comeback. The quality of their cars has improved, and Fiat believes that the recent gas crisis has made Americans more receptive to the small, fuel-efficient cars they specialize in. They have high hopes for an American rollout of the 500, an updated take on their iconic Cinquecento model from the 1950s. Thanks to the alliance, Fiat could use Chrysler factories in the US to build the 500, or other sub-compacts, for the American market. It would also help Chrysler quickly make the switch from larger, poorly selling vehicles to something they think is more marketable.

Fiat also announced they are planning to relaunch the more upscale Alfa Romeo brand in the US in the next couple of years.