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Chrysler and Fiat have hopes for happy relationship

By Zheng Lifei (Agencies)
Updated: 2009-05-06 23:47

Daimler's CEO Dieter Zetsche addresses the audience during the annual shareholder meeting in Berlin April 8, 2009. German carmaker Daimler forecast a "significant" drop in revenue in all of its automotive businesses this year as it pushed back its expectations of when the crisis-hit industry might recover. [Agencies]

The German leaders of that combined company — first Jürgen E. Schrempp and then Dieter Zetsche — refused to tear down the walls that separated Chrysler from Mercedes. Instead, they tried to run Chrysler as a stand-alone division and failed to take advantage of opportunities to develop vehicles together.

Full coverage:  Global Auto Industry Woes Related readings:  US court clears way for Chrysler-Fiat deal  Judge OKs Chrysler's steps toward sale to Fiat  GM: Some parts of Chrysler deal could help GM  Fiat eyes merger with GM Europe, Chrysler  Chrysler bankruptcy has little impact on China market

Fiat executives say there is no comparison to their alliance. "For Daimler to buy Chrysler was like Neiman Marcus merging with Home Depot," said one Fiat executive, who insisted on anonymity because of company policy. "They are a mass carmaker, and we are a mass carmaker," he said of Fiat and Chrysler. "We know this market better."

Fiat and Chrysler have much to offer each other. Chrysler desperately needs Fiat's small cars and fuel-efficient engines to balance an aging lineup of S.U.V.'s.

For Fiat, Chrysler offers an instant dealership network for its return to the United States. They can also benefit from savings on the $46 billion worth of parts and materials they would buy as a combined entity.

Chrysler's prospects are far worse now than when Robert Eaton, then its chairman, sold the company to Daimler. In the late 1990s, Chrysler was enormously profitable and determined to grow in tandem with Daimler.

Now Chrysler is bankrupt, and Fiat is its only hope.

Since it was sold in 2007, Chrysler has pursued a merger, alliance or joint ventures with several automakers, including G.M., Volkswagen, Toyota, Honda, Nissan and Hyundai, according to documents filed in the company's bankruptcy case in New York.

None of the overtures worked, including a last-ditch attempt in February to drum up interest from Chinese automakers in Chrysler's assets and product lines.

"Despite continual efforts over the course of approximately two and a half years, no party except Fiat has emerged as a viable and willing alliance partner for us," Thomas LaSorda, a Chrysler vice chairman, said in a court affidavit.

From the first discussions between Mr. LaSorda and Mr. Marchionne in March 2008, it was clear that the interests of the two companies were well aligned.

"The two companies were ideally matched," Mr. LaSorda said in his affidavit. He added that joining with Fiat would "solve strategic problems that Chrysler has been wrestling with for years."

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