Chrysler's Fiat deal hinges on $3B loan

1/22/2009

DETROIT - Chrysler LLC's deal with Fiat SpA depends on the U.S. automaker receiving an additional $3 billion emergency loan from the U.S. government, the company's product development chief said yesterday.

"I think that is part of the deal," Frank Klegon said when asked if the automaker needed the additional $3 billion for the Fiat deal to be completed. "That is part of the process. The expectation is that that is an important part of it."

Chrysler, which had asked for $7 billion, received a $4 billion U.S. emergency loan Jan. 2.

The automaker has said it is counting on getting the remainder of the funding requested from the government to keep operating.

"I think it is part of the term sheet, we would expect to get the next tranche," Mr. Klegon said.

Chrysler, owned by private equity firm Cerberus Capital Management, announced on Monday an alliance with Fiat that would give the Italian automaker a 35 percent stake in Chrysler in exchange for access to its technology and overseas markets. Fiat would help Chrysler put together the restructuring plan that Chrysler has to submit to the U.S. government by Feb. 17.

Fiat will decide in a year whether to take another 20 percent of Chrysler for $25 million, a source close to Fiat told Reuters.