Fiat and Chrysler have entered into a strategic alliance following the decision by the American firm to file for bankruptcy protection.
Chrysler entered discussions with Fiat over a year ago and the deal has been expected for some time.
Through the agreement, Chrysler says it will now be able to expand its product range and create more environmentally-friendly cars.
Under the alliance, Fiat will hold a 20 per cent stake in Chrysler, the Voluntary Employee Beneficiary Association will own a 55 per cent share, and the US and Canadian governments will own proportionate shares of a 10 per cent stake.
Fiat will be able to increase its ownership stake by an additional 15 per cent in three stages by meeting different criteria:
- 5 per cent for bringing a 40mpg platform to Chrysler that will be produced in the US- 5 per cent for producing a fuel-efficient engine family for Chrysler that will be made in the US- 5 per cent for providing Chrysler access to its global distribution network to help export Chryslers
Bob Nardelli, Chairman and CEO of Chrysler, said: "This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages.
“It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally-friendly, fuel-efficient high-quality vehicles. Benefits to the new company include access to exciting products that complement our current portfolio, technology cooperation and stronger global distribution."