Fiat comes to Chrysler's rescue

In a move designed to create viable car making options, Italy's Fiat SpA has picked up a 35- per cent stake in American auto major Chrysler.

Fiat, with its much stronger balance sheet, will not pump cash into the ailing Chrysler LLC, but will help retool its plants and improve manufacturing technology.

In return, Fiat will get access to the American market for its small cars.

Chrysler, the third-largest US automaker, would get access to Fiat's car line-up and global sales network to reduce its dependence on trucks and the North American market, while Fiat would expand its US foothold, which is now limited to its luxury brands.

Chrysler LLC was rescued last month with $4 billion in federal loans. Hammered by slumping demand in the worst US auto market since 1992, Chrysler had said it would be out of operating funds by mid-month without the federal aid.

The treasury can call the loans unless Chrysler meets a 31 March deadline to show it can slash debt by two-thirds and revamp operations.

Chrysler, which owns the Jeep, Dodge and Chrysler brands, is 80.1 per cent owned by Cerberus, which paid $7.4 billion for its stake in 2007.

The rest is held by Germany's Daimler, its former parent. Daimler has virtually written off its remaining 19.9-per cent stake.