Chrysler lays its cards (and Fiat's) on the table

Chrysler's submission to the US Government today has blown wide open the company's future directions in product and corporate strategy. New models still under development are now open to public scrutiny, as is the alliance with Italian maker Fiat.

The American manufacturer is seeking US $5 billion worth of incremental support from the taxpayer and in fact, the deal with Fiat is contingent on the American government agreeing to that level of support -- on top of the US $4 billion already provided to the ailing carmaker. Chrysler makes no bones about its financial wellbeing in the document, if the monies requested are not received before the end of next month, the company will have no option other than entering into 'Alternative III Orderly Wind Down', on the basis that it cannot continue operating.

But obviously the big news from this document revolves around the pictures and details of the next 300C (more here), the next Jeep Grand Cherokee (more here) and a host of other models that are still in development.

Among those are the C-EVO (C/D-segment sedan) and D-EVO (D-segment sedan) on the Chrysler side of the fence, plus a B-segment hatch, the D-segment Alfa Milano, D/E-segment Alfa Giulia and a crossover SUV, all from Fiat.

Technology sharing will be a substantial plank of the agreement between Chrysler and Fiat, with the former acknowledging the latter's leading edge position on the reduction of CO2 emissions. In the submission, Chrysler has also blown the whistle on Fiat's new induction-system technology that is either in place or to be rolled out between this year and 2012.

Fiat's turbo petrol engines ranging in size from 1.4 to 1.8 litres will reach an emissions target of less than 100g/km, the submission reports. A new variable valve system, known as 'Multiair', will reduce consumption by as much as six per cent and yet improve driveability. 'Multijet 2' is a further step forward in direct-injection diesel design, with reductions in nitrous-oxides, soot and noise emissions. Finally, there's 'Tetrafuel', a system that will allow an engine to run on up to four different fuel types: CNG, petrol, ethanol (E100) and E25 ethanol/petrol blend. This development is intended for flex-fuel markets such as Brazil, and has potential for other markets likely to offer different fuel types in the future -- Australia being one.

Fiat is also working on a two-cylinder petrol engine with turbocharging. This will draw upon the Multiair induction for fuel delivery. The submission doesn't outline the engine's displacement or what sort of car it would power, but the Fiat 500 appears likely, presuming the 900cc engine set to power it in the future will be the two-cylinder unit.

Fiat and Chrysler will also collaborate on (or at least Chrysler will 'share') the development of a dual-clutch transmission like Volkswagen's DSG box, but with dry-plate clutch technology. Chrysler will also benefit from electrically-assisted power steering and lighter seats, both being developed or already available from Fiat.

One of the elements of the Fiat/Chrysler alliance that has now been confirmed with the submission is Chrysler's support for Alfa Romeo product distributed in North America. Furthermore, it's anticipated that Chrysler products distributed with the assistance of Fiat in non-traditional markets will add 393,000 units of throughput from this year out to 2016, securing US $1.3 billion extra for the coffers (EBITDA).

There'll also be as many as two million units of new models for which development will be shared by the two companies and sold in North America and other markets. Chrysler has estimated this 'KPA' to be worth US $1.4 billion and the 'economies of scale' savings by sourcing parts from common suppliers could be worth as much as US $3.2 billion. Fiat's involvement will effectively address the shortcomings of Chrysler's current product portfolio, which is heavily slanted in the direction of heavier vehicles. According to the plan, the partnership between Chrysler and Fiat would create a new manufacturer, the sixth largest in the world.

This is one of the benefits in the deal for Fiat. It will gain from Chrysler's volume-manufacturing expertise, with the American company building Fiat-branded models in the US for American consumption.

In another item of interest, Chrysler pursued mergers and alliances with GM and Nissan, before the recent non-binding memorandum of understanding with Fiat. It was GM's decision, according to Chrysler not to persist with the merger talks and Chrysler determined that any alliance with Nissan would not be viable.

The company's submission makes assumptions such as the American new-car market remaining flat, with forecast sales volumes of 11.1 million units in 2009, increasing to 12.1 million in 2010. There's a further assumption, which is not deemed valid since the initial research work for the submission was carried out in December 2008, that sales may reach 13.7 million in 2011 and 2012.

Chrysler has been reducing its fixed costs since 2007 and current fixed costs are back to 1994 levels, the company reported in the submission. In the current economic climate, that's still not enough -- even with further cost reductions likely to amount to US$3.8 billion this year.

Among the issues affecting viability of Chrysler and the other American car manufacturers, the submission targets the credit crisis (which is actively hindering purchasers in the position to buy a new car) and a loss of consumer confidence virtually unprecedented in living memory.

The massive slump in US car sales during 2008 cost Chrysler alone 640,000 sales, equating to US$15.5 billion worth of revenue. That black-hole in the market is exacerbated by what Chrysler describes as a shift in demand away from fuel-guzzling light trucks and SUVs, a consequence of the record-high pricing of fuel during 2007 (since brought back to a much more reasonable level, but not before the damage was done).

As we work our way through the document, we'll bring you more info throughout the day.