“There have to be three near-miracles” for a partnership with Fiat SpA to succeed in rescuing Chrysler LLC, says Dennis DesRosiers, an auto consultant in Richmond Hill, Ontario.

“First, Americans have to embrace small cars,” he says. “They never have.” Neither have they bought Italian small cars in any volume; nor have small cars been profitable for any auto company in North America that wasn’t Japanese, says DesRosiers, a market research consultant for 24 years.

That kind of challenge is nothing new for a company born 84 years ago in Walter P. Chrysler’s reorganization of the Maxwell Motor Co. The bankruptcy filing Thursday by the Auburn Hills, Michigan-based automaker is the company’s fourth near-death experience since 1979. President Jimmy Carter’s US$1.5 billion government loan guarantee that year helped Lee Iacocca avert failure and turn himself into a Detroit icon.

The maker of Dodge Grand Caravan minivans and Charger sedans was given an $8.08 billion lifeline Thursday by President Barack Obama and forced into a shotgun marriage with the Italian automaker. The revival Iacocca led was based on sales of the K-car, a small, fuel-efficient, inexpensive line of sedans. This time, Chrysler will have to rely on low-priced, gas-thrifty cars from the Fiat lineup including the Punto and Fiat 500.

Chrysler didn’t escape bankruptcy in its latest death- defying move, and the success of its marriage with Fiat isn’t a given, analysts said.

Muscle cars, minivans

“To say that this Fiat deal is going to solve everything is just naïve,” said Rebecca Lindland, a senior auto analyst at IHS Global Insight in Lexington, Massachusetts. “It’s just not true.”

For much of its history, Chrysler has been the scrappy No. 3 to General Motors Corp. and Ford Motor Co.

The Plymouth Valiant, introduced in 1959, was an economical alternative to other midsized cars, while Chrysler burnished a reputation for engineering with the Hemi V-8 engine, in 1951, and 1960s muscle cars like the Charger. The Caravan in 1983 pioneered the minivan. Chrysler also blazed a trail with cash-back sales incentives in the 1970s.

General Motors, which celebrated its 100th year in 2008, is also reorganizing with the help of government financing. The Detroit-based automaker replaced Chief Executive Officer Rick Wagoner with Fritz Henderson on Obama’s orders in March.

Dealers whose livelihoods are staked on Chrysler’s success say they hope Fiat’s promise of fuel economy will keep the company alive this time around.

Punto, Panda

Fiat vehicles get the highest gas mileage in the world, which could give Chrysler a way to counter Japanese automakers, said Dale Early, who owns a dealership in the Houston suburb of Kingwood, Texas.

“Toyota, Honda, Nissan – they’ll no longer be able to lay claim to some of the things they can lay claim to Friday in the US market,” said Early, a Chrysler dealer since 1987.

Michael Jackson, CEO of AutoNation Inc., the largest publicly traded car dealer, said that if oil and gas prices rise, “I could sell Fiats all day long.”

Fiat said it will put no cash into its Chrysler investment. Instead it’s contributing small-car technology and designs so the American company can build and sell the subcompact 500, which won European Car of the Year in 2008, and the Panda, Punto and Grand Punto small cars.

None of Fiat’s models could be sold immediately in the US because they don’t conform to federal safety and other regulations. The design changes may take one to two years. Fiat said it could start selling its vehicles through Chrysler dealers in 2011.

Source: Bloomberg