Chrysler has until April 30th to ink a strategic alliance with Fiat, but it appears as though the Michigan automaker has finalized the deal a day early. Reports are now surfacing that Chrysler and Fiat have finally come to an agreement, with the deal set to be signed by Thursday. However, Chapter 11 bankruptcy could still be used as a tool to clear debt and reduce liabilities. But with the backing of Fiat and the U.S. government, Chrysler will almost certainly emerge.
According to the Associated Press, Fiat will sign a strategic alliance with Chrysler by Thursday. Fiat and Chrysler have been working on the proposed alliance for the last several months now, but were recently spurred by the Obama administration to accelerate the talks. Chrysler was also able to ink key labor deals with unions in the United States and Canada, laying the groundwork for the Fiat alliance.
The alliance will likely see several Fiat models sold in the U.S. under the Chrysler banner, including the Fiat 500 shown at the Chrysler stage during this year's New York Auto Show. Several other Fiat models will surely make the trek across the Atlantic, and it remains possible Fiat could bring its Alfa Romeo brand back to the States.
Although the news for Chrysler is encouraging, the ailing automaker isn't quite out of the woods yet. Three creditors are said to be dragging their feet on a debt-for-equity swap. As such, President Obama will announce Chrysler's Chapter 11 bankruptcy filing tomorrow, according to Bloomberg. All parties involved hope the bankruptcy will be surgical and last no longer than 30 days, but Chapter 11 filings are rarely short and sweet. However, Chapter 11 protection is far better than the Chapter 7 liquidation scenario President Obama laid out one month ago.
If and when Chrysler finally does get back on its feet after it clears bankruptcy, we could see a complete merger between Chrysler and Fiat. Fiat will initially take a 20 percent stake in Chrysler, but could completely merge with the Michigan automaker once all federal loans are paid off. The U.S. government has made it clear it will not allow Fiat to take a controlling stake in Chrysler until the loans are repaid.
Stay tuned to Leftlane News for all the updates on this quickly developing story.