Fiat's (FIA.MI: Quote, Profile, Research, Stock Buzz) chief executive has flown to Chrysler LLC's CBS.UL home town of Detroit to meet trade unions and creditors after U.S. authorities gave the carmakers 30 days to set up a partnership to save Chrysler.
Sergio Marchionne flew late on Monday to Detroit after U.S. President Barack Obama ordered Chrysler to accelerate its efforts to survive and prepare itself for possible bankruptcy. Marchionne was accompanied by Alfredo Altavilla, Fiat's head of business development, who is leading the talks with Chrysler and the U.S. auto task force, a Fiat spokesman said on Tuesday.
The Italian industrial group first announced its plans for a partnership with Chrysler in January. It is to give technology for small cars and access to foreign markets in exchange for a stake in Chrysler and entry into the U.S. market.
If the agreement is finalized, as we hope it will be in the coming weeks, it will present an extraordinary occasion, Fiat's chairman, Luca Cordero di Montezemolo, said on Tuesday.
The American market, despite the fact that it is going through a difficult moment, remains the biggest of challenges and opportunities, he said.
Obama has rejected a plan submitted by Chrysler to remain a viable concern with the help of Fiat, saying the third-biggest U.S. car maker had not done enough to justify getting billions of dollars more in government loans.
He gave Chrysler 30 days to complete the partnership with Fiat, considered Chrysler's best chance of survival after sales plunged in the worst industry crisis in decades.
One of the conditions demanded of Fiat by the task force was to take a smaller stake in Chrysler than it had previously agreed, down from 35 percent to 20 percent, a source familiar with the talks said.
A member of the government's task force mentioned the possibility of splitting off the Chrysler's bad assets and sending them through a court-supervised bankruptcy.
Marchionne said the task force as being tough but fair.
The next step for Chrysler is to reach cost-saving deals with its unions and creditors.
Analysts fear these talks might lead to the partnership costing Fiat more than it had originally planned.
Despite the group's insistence that it will invest no cash nor assume any debt from Chrysler, analysts suspect Fiat might be forced to do just that to win the task force's favor.
By 9:27 a.m. EDT, Fiat shares were up 10.31 percent at 5.27 euros, outperforming the DJ Stoxx industry index , which was down 0.27 percent. On Monday Fiat shares fell nearly 10 percent.
In the latest of a series of production halts to adjust to the weak demand for cars, Fiat will leave the assembly lines idle for two weeks at Mirafiori, it main plant in Turin, according to a Fismic union official.
The halt will last from April 27 to May 3, sending nearly 5,000 home on reduced pay.
(Additional reporting by Gilles Gianni Montani in Turin; Editing by Andrew Macdonald/Greg Mahlich)