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Fiat contradicts Chrysler, says it won't assume debt

If Fiat comes to U.S. markets, the Fiat 500 is likely to be one of its offerings. Here, the convertible version is shown at the Geneva auto show.

By Colleen Barry, AP Business Writer
MILAN — The Italian automaker Fiat said Friday that it won't assume Chrysler debt — current or future — in deal for a 35% stake, contradicting statements from Chrysler's chief executive that it would.
The statement said that Fiat "intends to make absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness to Chrysler."

Chrysler said Thursday in a video posted on its website that the Italian automaker would be responsible for 35% of Chrysler's debt to the U.S. government should a proposed alliance go through.

The statement was later reversed on the company's website. A Fiat spokesman in Italy said Friday that negotiations with Chrysler were continuing.

Fiat shares slipped 5.5% to $6.08 on the Milan stock exchange early Friday because of the Chrysler statement. After the Fiat statement, shares recovered to $6.34.

The Chrysler video featured clips from CEO Bob Nardelli, who said 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 media website Friday morning. Messages were left for Chrysler spokeswomen seeking clarification.

Fiat is discussing trading its small-car and small-engine technology for a 35% 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 Fiat 500.

Nardelli said earlier this week 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 a video on Thursday, 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.

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 the Obama administration's auto industry task force.
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