Detroit: Automaker Chrysler Llc. is in talks to lease US production capacity and share retail distribution with Fiat SpA, allowing the Italian car maker to return to the US market after 25 years, people briefed on the talks said on Wednesday.
Chrysler, the No. 3 US auto maker, has also been in discussions with India’s Tata Motors Ltd about selling its Jeep Wrangler SUV in India and possibly other Asian markets, said the sources, who were not authorized to discuss the negotiations.
A spokesman for Chrysler, which is controlled by private equity firm Cerberus Capital Management Lp., declined to confirm the talks. A Tata representative had no immediate comment. Cerberus and Fiat representatives could not be reached immediately.
Fiat chief executive Sergio Marchionne has said Fiat is looking for a partner for its return to the North American market.
A Chrysler tie-up with Tata could potentially open a new market for the Wrangler, the best-selling model from the brand widely seen as Chrysler’s strongest.
Fiat and Tata already have a partnership. Fiat agreed this month to handle the financing in Europe for Tata’s Jaguar and Land Rover brands, while Tata said it was open to Fiat selling the Nano, the world’s cheapest car with a price just above $2,500 (Rs1 lakh).
Tata and Chrysler are already cooperating on developing an electric vehicle. Tata said in January that “exploratory discussions” had begun with Chrysler over sales for a battery-powered version of its Ace mini-truck.
Chrysler is continuing those talks after reaching a memorandum of understanding for the negotiations, one person familiar with the auto maker’s plans said.
Tata, which controls about 60% of India’s truck and bus market, has global ambitions and an emerging line-up that runs the gamut from luxury to the sold-out Nano.
By concluding a deal with Tata, Chrysler also could look to sell a version of the Jeep Wrangler to the Indian military, another person familiar with the talks said.
Chrysler redesigned the off-road-ready Wrangler in 2007, adding a popular four-door version of the SUV that has emerged as the linchpin of its Jeep line-up.
US sales for the Wrangler dropped 4% in the first half, while overall SUV sales plunged 15% as Americans shifted toward smaller, more fuel-efficient passenger cars.
The sudden shift away from light trucks, including pickups, SUVs and vans, hit all three Detroit-based auto makers hard in the first half and has forced them to restructure.
Like its larger rivals General Motors Corp. and Ford Motor Co., Chrysler has faced scrutiny over its liquidity because of the sharp decline in sales.
Chrysler lost $1.6 billion in 2007, and the holding company that includes both the auto maker and its financing unit, Chrysler Financial, lost $509 million in the first quarter.
Fitch Ratings Ltd downgraded Chrysler on Tuesday, warning that the auto maker could run below the “minimum required levels” of cash to finance operations by the second half of 2009 if industry wide sales remain flat or worsen.