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Fiat likely to buy stake in Chrysler

January 20, 2009 18:20 IST

Italian car maker Fiat is in talks to acquire 35 per cent stake in ailing American auto major Chrysler, says a media report.

"In an attempt to revive two of the world's storied auto makers, Italy's Fiat SpA and Chrysler LLC are poised to

announce a partnership as soon as today in which Fiat could take control of the US company's operations," The Wall Street Journal said, quoting people familiar with the matter.

Under the terms of the pact that is being hammered out, the daily said Fiat is likely to take a 35 per cent stake in Chrysler by the middle of this year. Further, it would have the option of increasing the stake to as much as 55 per cent, the report noted.

The report quoting people familiar with the matter said that Fiat, the stronger of the two, wouldn't immediately put cash into Chrysler.

Instead the Italian car maker would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the US, the daily noted.

Fiat would also provide engine and transmission technology to help Chrysler introduce new, fuel-efficient small cars, the daily said.

The report stated that the partnership would provide each company with economies of scale and geographical reach at a time when both are struggling to compete with larger and more global rivals like Toyota Motor, Volkswagen AG and the alliance of Renault SA and Nissan Motor.

On the possible talks, attributing to Chrysler spokeswoman Lori McTavish, the report said, "in today's economic environment, talks are going on between companies in all industries -- ours is no different".

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