Chrysler To Sell JEEP To TATA ?

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EXCLUSIVE-Chrysler in talks with Tata, Fiat-sources
07.30.08, 6:39 PM ET


By Kevin Krolicki and Poornima Gupta

DETROIT (Reuters) - Chrysler is in talks to lease U.S. production capacity and share retail distribution with Fiat (nyse: FIA - news - people ) SpA , allowing the Italian automaker to return the U.S. market for the first time in 25 years, people briefed on the talks said Wednesday.

Chrysler, the No. 3 U.S. automaker, has also been in discussions with India's Tata Motors Ltd (nyse: TTM - news - people ) 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, credited with steering a turnaround behind the Alfa Romeo, Lancia and Fiat brands, has said Fiat is looking for a partner for its return to the North American market.

Fiat is riding the popularity of its Fiat Cinquecento (500) compact car in Europe and Brazil.

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.

One investment banker, who declined to be identified, said it was likely that a product-centered tie-up with Chrysler could lead to a larger deal over time.

"You could definitely see this evolve into something," the banker said. "It would make sense for Tata to buy Jeep if this partnership went through ... and Chrysler could really do with selling a brand and getting some cash."