In a further step to solidify the proposed alliance between car makers Fiat and Chrysler, Chrystler, which is 80.1% owned by private equity firm Cerberus Capital Management, has said Fiat will not assume any of its debt.
Under the agreement Fiat would receive a 35% stake in Chrysler but would not pay any cash.
The American car maker has already received US$4bn of US government emergency aid. Chrysler now has until March 31 to prove it can remain a viable company and maintain the current loan and to receive additional funding. The proposed partnership with Fiat is hinged on Chrysler receiving additional funding.
In 2007, DaimlerChrysler, the German carmaker, sold its ailing US unit to Cerberus. The deal was reported to have cost DaimlerChrysler €500m and involved a €5.5bn capital injection from the Cerberus.