Done Deal: Italy's Fiat Now Owns Most of Chrysler's Assets

DOWNERS GROVE, Ill., June 10, 2009— -- Italy's Fiat has closed a deal that makes it the owner of most of Chrysler's assets and saves the ailing Detroit automaker from liquidation.

For surviving Chrysler dealerships the new era means selling the very same models from a brand new entity.

"A new company, a new start, will give us a way to go," says Daniel Frost, president of Southfield Chrysler Jeep in Southfield, Mich. "We're not carrying over all the burdens of the old company."

At the company's old headquarters in Detroit, a new Chrysler was emerging, in the grip of Fiat chief executive Sergio Marchionne, the hard-charging executive who some call the Italian Lee Iacocca.

Since arriving at money-losing Fiat in 2004, Marchionne turned around the once-troubled Italian carmaker using a flair for sharply styled small cars and smart industrial alliances. Those are strengths that could come in handy at Chrysler, many auto industry analysts say.

"Marchionne has a good track record," says Katie Kerwin, editor at Auto Beat Daily. "He turned around Fiat when it was in big trouble."

A statement from Fiat says the new company will soon reopen Chrysler factories that were idled during the bankruptcy process. It also says the new company will focus on smaller, "environmentally friendly" vehicles.

"Work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward," the statement reads.

The new Chrysler is smaller and financially stronger after getting $22 billion in taxpayer money. It has little debt and a new labor deal that makes it far more competitive.

"We're looking at a Chrysler that's leaner. It's in fighting trim," Kerwin says. "Everything is lined up, aligned for them to do better as a company."

The new deal means that Chrysler dealerships will sell the Chrysler, Dodge, Jeep, and eventually Fiat brands under one roof. In Europe, Fiat compacts, such as the 500, are selling well.

After Chrysler-Fiat Deal, Will Americans Embrace Itallian Models?

But models approved for the U.S. market won't arrive for nearly two years.

Fiats are still hard to find in the United States, except for vintage models long revered by car enthusiasts. The last time Fiat seriously competed in the U.S. market was 30 years ago.

Analysts are split on whether Americans -- long in love with larger automobiles -- will embrace Italian models.

"The cars that people want to buy in the U.S. are two or three sizes bigger than anything Fiat makes," says Mike Dushane, executive editor at CarandDriver.com

But Fiat dealers in the United States are bullish on future sales.

"With the smaller engines, the smaller cars, the gas prices are going up, lotta people are going to the smaller vehicles," says Scott Schmalholz, a sales manager at Premier Auto Haus in Downers Grove.

Still, industry analysts are quick to point out that -- big or small -- the new Chryslers will only succeed if and when Americans start buying more cars.

Chrysler's sale to Fiat also marks a victory for the Obama administration. It guided Chrysler into Chapter 11 protection April 30 with the hope that the company would emerge in a matter of months with a new partner.

"This morning's closing represents a proud moment in Chrysler's storied history," the Treasury Department said in a written statement. "The Chrysler-Fiat Alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker."