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Chrysler: Fiat Deal Would Help Increase Funding

Proposed alliance with Fiat will bolster Chrysler’s case to receive an additional $3 billion in government loans and help it successfully restructure, said company president Jim Press.

LINTHICUM HEIGHTS, Md. (AP) -- Chrysler's proposed alliance with Fiat will bolster its case to receive an additional $3 billion in government loans and put the struggling company on the road to becoming a "true global powerhouse," a top company executive said Tuesday.

Jim Press, Chrysler LLC's president and vice chairman, acknowledged that questions remain about the pending deal to share products and technology with Italian automaker Fiat Group SpA. But he said it would help Chrysler successfully restructure the company.

"We think the partnership with Fiat not only gives us a lot of confidence, but more than that, it really moves us to a prosperity plan where it's a true global powerhouse," Press told reporters following a meeting with dealers near the Baltimore-Washington International Thurgood Marshall Airport.

Press predicted that it would "make the government a lot more confident that the repayment is going to occur on schedule."

Chrysler received $4 billion in loans from the federal government earlier this year and needs another $3 billion in loans by the end of March to stay afloat. It must submit a plan to the Obama administration in mid-February showing that it will be a viable company in the future.

Chrysler is trying to wrestle concessions from the United Auto Workers union, debt holders, dealers and suppliers by late March to reorganize the company. The government could recall the loans after March 31 if Chrysler fails to show a path to profitability, a move that would essentially force the Auburn Hills, Mich., automaker into bankruptcy.

Press said discussions with the various stake holders were progressing, with Vice Chairman Tom LaSorda leading talks with the unions and suppliers and Steven Landry, the company's executive vice president for North American sales and marketing, leading efforts with dealers.

"I'm hopeful ... that this will go together and we'll be able to prove this plan is worthy of a $7 billion loan when we get to March 31," Press said.

The Fiat deal would give the Italian company a 35 percent stake in Chrysler without having to contribute any cash. The ownership stake could grow to a majority interest in the U.S. automaker.

Some members of Congress have expressed reservations about providing taxpayer funding to Chrysler if the company may eventually be owned by a foreign company.

Press said the partnership with Fiat would accelerate the company's development of badly needed small cars and allow it build the products in North American assembly plants.

"By doing that they're helping to save the U.S. auto industry," Press said. "The funds from the loan will not go to Fiat -- it's to Chrysler LLC which is an American company."

"They're making the bet along with the American taxpayer to shore this company up and strengthen our future," he said.

Press predicted Chrysler could still show the Obama administration that it has a profitable future if the government blocked the alliance with Fiat, which requires approval by the Treasury Department.

He said when company executives initially sought funding from the government last year, Chrysler forecast a U.S. market of 11.1 million vehicles sales. He said even if sales slump to about 10 million for the year, which many analysts anticipate, Chrysler would still be "within the range of viability without any partner."

If the Fiat deal falls through, Press said the company has had discussions with other potential partners about possible alliances, "so we have other alternatives," Press said, declining to elaborate on the possible partnerships.

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