Chrysler reverses claim Fiat would take debt

updated 2:22 p.m. ET March 20, 2009

DETROIT - A public tiff between Italian automaker Fiat SpA and Chrysler LLC apparently ended Friday when Chrysler rescinded a statement on its Web site that Fiat would be responsible for part of Chrysler’s debt if the two companies join forces.

Chrysler, in a Web video on Thursday explaining why an alliance for the two companies would be good for Chrysler and the country, said Fiat would be responsible for 35 percent of what Chrysler owed to the U.S. government.

But Fiat on Friday denied that it would be responsible for any of Chrysler’s debt.

The two companies are talking about an alliance in which Fiat would take a 35 percent stake in Chrysler in exchange for Fiat’s small-car technology.

Chrysler, in a statement issued Friday, reversed the claim it made on the Web and said Fiat would become an equity holder.

“To clarify, this does not mean Fiat would assume responsibility for any of Chrysler LLC’s debt,” the statement said.

Fiat Group said in a statement Friday said it “intends to make absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness to Chrysler.”

The Chrysler video featured Nardelli saying that the company can be viable on its own, but a deal with Fiat would enhance that viability. A narrator made the statement about Fiat being responsible for the Chrysler debt.

The video remained on Chrysler’s Web site Friday morning, but the part about Fiat assuming debt had been removed.

Fiat is discussing trading its small-car and small-engine technology for a 35 percent stake in Chrysler in a non-cash deal. The agreement would help Chrysler bring badly needed small cars to its showrooms while helping Fiat re-enter the American market with the Alfa Romeo brand and the update of the iconic Fiat 500.

A Fiat spokesman in Italy said Friday that negotiations with Chrysler were continuing.

Nardelli earlier this week said that Chrysler would get technology and other items worth $8 billion to $10 billion under the alliance — a contribution Nardelli said would be equal to or greater than the loans Chrysler is seeking from the U.S. government.

In the video, Nardelli said Chrysler is considering using four Fiat car architectures as well as two engines and transmissions. Those architectures would be in the categories of micro, subcompact and compact cars, said Chrysler spokesman David Elshoff.

Also in the video, Chrysler said an alliance with Fiat would help it leapfrog five or six years ahead in development of fuel-efficient and clean-air technology.

Chrysler is working to meet the conditions of its $4 billion federal loan and prove it deserves to get the additional $5 billion it has requested.

Any deal with Fiat is contingent upon the company gaining U.S. government approval of its viability plan and the release of additional government loan money to Chrysler.

Fiat CEO Sergio Marchionne has testified on the deal before Obama administration’s auto industry task force.

Also in msnbc.com business ConsumerMan: The great rebate debate Retailers learn lessons from Black Friday death Your Career: How your name may hurt you Answer Desk: Unemployment benefit madness   Video: Stores are hoping for a holiday miracle

MORE FROM AUTOS

Autos Section Front

Toyota to replace 3.8 million gas pedals GM selects Canada to build new Buick Nissan hatches plan to boost battery cars Source: GM has no other Saab suitors Saab’s future unclear as GM loses bidder Toyota to recall 110,000 Tundras over rust Leasing again becoming option for auto buyers GM asks Europe for up to $4.9 billion handout Electric car maker Tesla seen going public 10 strange-looking foreign cars Autos Section Front   Add Autos headlines to your news reader: