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by Matt Brogan

Fiat is in negotiatiions with Chrysler LLC to form a strategic partnership that could include a Fiat equity stake in the ailing American manufacturer. The pact would greatly help Chrysler to speed and strengthen its restructuring plan.

According to people close to the source in both Turin (Italy) and Detroit (USA), Fiat could give Chrysler access to its mini, small and mid-sized car platforms, engines and transmissions.

This would allow Chrysler to quickly build a new range of front-wheel-drive, low-emission vehicles, something Chrysler has already planned for with Nissan who are to produce a small car based on the Dodge Hornet concept (pictured below) by 2010.

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If the deal is completed, Fiat would get between a 30 and 35 percent stake in Chrysler in exchange for Fiat’s platform, engines and transmission technology. This would be expanded to a share up to 55 percent over time.

The two companies have signed a memorandum of understanding on the alliance, which could be announced within days.

“In today’s economic environment, talks are going on between companies in all industries, ours is no different,” Chrysler said in a prepared statement today. “Chrysler LLC as a matter of policy however, does not confirm or disclose the nature of its private business meetings. Beyond those partnerships and alliances already announced, Chrysler has no further announcements to make at this time.”

Due to the time difference a Fiat spokesman was not immediately available to comment. Chrysler’s majority owner, Cerberus Capital Management LP, declined to comment. Thomas Froelich, a spokesman for Daimler AG in Stuttgart, declined to comment (Daimler still owns 19.9 percent of Chrysler).




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