"We estimate the cash value of Fiat's contribution to be between $8 and $10 billion, considering the cost to develop these vehicles, platforms and powertrains from scratch," Nardelli said in a statement to his employees.
The $10 billion value of the proposed alliance does not come in the form of cash (the terms of the deal state Fiat will not pay any money to Chrysler), but as a result of cost sharing between the two companies in purchasing, engineering and technology. Fiat will receive in turn a 35 percent stake in the American manufacturer.
"Production of vehicles for Fiat in North America will allow Chrysler to increase its plant utilization, helping to preserve and create in excess of 5,000 manufacturing jobs. The overall contributions from Fiat and the synergies we realize will far exceed the value of the government loans," added Nardelli.
The alliance between the two companies is almost certain, but the two parties are still undergoing talks on how should the deal be implemented. A major obstacle for the alliance's birth would be for Chrysler not to meet all the governments requirements. These are vital steps that need to be taken by Chrysler to get approval for finalizing the alliance.
It is the first time, since the rumors of the alliance surfaced, when one of the two parties estimates the value of the deal. Chrysler, the side which, at first glance has the most to gain from the deal, at least in the short run, admitted that it cannot survive the crisis without any partners.
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