Image: Fiat CEO Sergio Marchionne
Antonio Calanni  /  AP
Fiat — led by CEO Sergio Marchionne — and Chrysler have agreed to form a strategic alliance that would give the Italian auto empire a 35 percent stake in the troubled U.S. carmaker and could eventually bring it full control.
updated 1/21/2009 3:23:54 PM ET 2009-01-21T20:23:54

The joke used to be that Fiat stood for Fix It Again, Tony! But an alliance with Chrysler and a new generation of safe and stylish cars have positioned the Italian automaker for a comeback in the U.S. after an absence of more than two decades.

Fresh from shedding its reputation for breakdowns and turning around its books, Fiat hopes the financial crisis and an environment-conscious U.S. administration will open doors in America for its compact, cheap and fuel efficient models.

The Turin-based automaker has been looking for a way back into the United States, particularly for its two-door 500 compact — a hit remake of its iconic model.

"I'm sure that many in America will fall in love with the Cinquecento," said Furio Santini, president of a club of 500 fans near Pesaro, on Italy's eastern coast. "A small and efficient car like that is just what they need."

Santini owned a previous version of the Cinquecento (Italian for 500) and remembers it well. "It was my first car when I was young. It was indestructible: My fellow members in the club drove all across Europe with it, and it always brought you home."

Dan Lennon, former president of Fiat America, a club for Italian car enthusiasts, said the earlier incarnation of the Cinquecento was very popular and "being able to bring the icon back is something a lot of people would be interested in.

Fiat appeared to gain a U.S. foothold Tuesday with the announcement that the company had signed an initial agreement to acquire 35 percent of Chrysler in exchange for sharing its technology and vehicle platforms.

The no-cash deal, which could lead to the Italians taking increasing control of the struggling U.S. carmaker, would allow Chrysler plants and distributors to build and sell Fiat's models as well as its own small cars designed on Fiat underpinnings.

A Fiat spokesman said a deal for the Italian auto company to take a 35 percent stake in Chrysler is "absolutely not" contingent on the struggling American carmaker getting an additional loan from the U.S. Treasury Department.

Spokesman Gualberto Ranieri denied a report in the Wall Street Journal that quoted people familiar with the deal as saying the alliance would go ahead only if Chrysler received a $3 billion loan in addition to the $4 billion granted last year.

Ranieri said the agreement is contingent mainly on approval by the Treasury, which should come when Chrysler presents its industrial plan, including Fiat's contribution, next month.

Ranieri also said the company was encouraged by good U.S. performances of competing compacts like BMW's Mini and Daimler's Smart.

"We are still talking about a niche, but you have to start somewhere, you have to gain a foothold," he said. "If this administration is serious about the environment, what might happen is that the bigger the car, the higher the taxes you'll pay, like it already is in Europe."

Fiat officials and analysts believe the economic downturn and concerns for the environment are likely to turn at least some Americans away from larger gas-guzzling vehicles.

"We all have less money, we all have habits we'll have to give up, and Americans may have to cut down on the SUVs," said Giuseppe Berta, who teaches history of economics at Milan's Bocconi University.

The Chrysler alliance is subject to financial reviews and regulatory approvals, including by the U.S. Treasury Department, which loaned the car maker $4 billion. No date has been set for Fiat's return to the United States, which it left in 1983 after a 20-year presence, and details on models are sketchy.

While Fiat has several new cars, including the Grande Punto and the Bravo, that have helped beat its reputation for releasing sub-par vehicles, the bulbous 500 is sure to lead the charge.

Since its launch in 2007 the new 500 has secured Fiat's turnaround and anchored its new image. With more than 170,000 cars sold last year in Europe — about half in Italy — it has proven its appeal beyond the nostalgia buyers.

The old Cinquecento (chink-way-che'n-tow), released in 1957, was the archetypal cheap car for the masses and a symbol of Italy's postwar economic boom. The tiny rear-engine model with two seats up front and a back bench still holds memories of first cars and first loves for many Italians.

The new model has kept the retro look, but puts the emphasis on safety and the Italian obsession for design and style. Larger than the original, it has been praised for its low CO2 emissions and won a slew of awards, including Europe's Car of the Year 2008, and top marks from Euro NCAP, an agency that assesses car safety.

The car is high on gadgets and personalization, with options ranging from a USB port to bizarre sticker kits, including a rooftop checker pattern or racing stripes in the Italian red-green-and-white.

While Fiat used to boast that the old 500 could be bought with just four or five paychecks, the new model is not that cheap, starting at $14,400.

For those not looking for cheeky little cars back from the past, Fiat has said it plans to introduce the Alfa Romeo brand in the United States, though it recently delayed the launch to 2011.

One model that has been floated for U.S. sales is the MiTo, a three-door hatchback that the maker of sports cars and luxury sedans released in 2008 to enter the small car market.

The powerful MiTo is based on the platform of Fiat's Grande Punto and starts at $19,850.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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