By Gilles Castonguay and Poornima Gupta
MILAN/DETROIT (Reuters) - Italy's FIAT (F.IT)unveiled a deal to take a 35 percent stake in struggling automaker Chrysler LLC as France weighed plans for an emergency aid package for its own battered auto industry and Toyota named Toyoda family scion to lead the company.
In Detroit, an U.S. auto supplier executive called for a bailout for the parts industry, saying the sector needs between $5 billion (3.6 billion pounds) to $10 billion in government aid to survive a cash crisis in the next few months.
The plea from Dura Automotive Systems Inc Chief Executive Tim Leuliette, who said the U.S. supply base faces severe borrowing issues in February, underscored the growing stress in the auto industry that is grappling with the fallout from the credit crisis and the steep plunge in vehicle sales.
To improve its chances of survival and remain viable, Chrysler on Tuesday announced it has a non-binding agreement with Fiat that would give the U.S. automaker access to Fiat's more fuel-efficient vehicle platforms and would help it move into markets where currently does not have a presence.
The alliance also would pave the way for Fiat to market its vehicles in the United States, which is still the largest car market in the world despite a steep downturn that has now spread across Europe and Asia.
In France, politicians struggled to fashion a coordinated response to the hard hit sector and put together a bailout for the industry.
French Prime Minister Francois Fillon said his government was considering an aid package for the country's carmakers worth 5-6 billion euros.
"I think all European governments share this opinion ... There is an emergency. We need a massive response on the automobile sector's financing," he told a French car industry summit, adding that a package could be announced soon.
German Chancellor Angela Merkel was critical of aid to auto companies, warning that state bailouts risked distorting competition and did not offer a long-term solution to the crisis. Meanwhile carmaker BMW said it would scale back production and cut back working hours for 26,000 of its German staff in February and March as sales drop.
Peugeot Chief Executive Christian Streiff warned on Monday that 2009 would be a "terrible year," while his counterpart at Renault-Nissan, Carlos Ghosn, forecast on Tuesday that the auto sector downturn would be long-lasting.
In Asia, Toyota named Akio Toyoda, grandson of the company's founder, to head the world's largest automaker at a time when it is cutting back production and putting expansion plans in the U.S. market on hold.
The announcement ends years of speculation over when Toyoda, who turns 53 in May, would take the helm. He joined the board of directors in 2000 after 16 years with the company.
Toyota, like its rivals worldwide, is grappling with falling global sales that has led to the Chrysler-Fiat tie-up.
Fiat's vice-chairman John Elkann said the potential stake in Chrysler would give the Italian automaker the scale it needs to survive, while Chrysler can expand its portfolio to include less-polluting cars, meeting criteria for access to U.S. funds.
Chrysler CEO, Bob Nardelli said in an open letter to all stakeholders that the US automaker would have access to all of Fiat's vehicle platforms except Ferrari.
"The alliance would greatly increase the global reach for our Jeep, Dodge and Chrysler brands in markets outside of North America, and Fiat's distribution organisation would provide Chrysler a strong partner to help build our brand's presence in important markets where we have little presence today," Nardelli said.
"Fiat is looking at Chrysler as an inexpensive way to re-enter the U.S. market ... (and) should gain access to cheap U.S. assembly," said Bank of America Merrill Lynch analyst Harald Hendrikse.
The Fiat deal is the latest in a series of alliances that car makers have formed to cut costs and improve margins.
Chrysler, which already has received a loan of $4 billion from the U.S. government, has requested a further $3 billion of government loans to avoid collapse.
Like General Motors Corp, which also got government money, Chrysler is required to meet cost-cutting targets as a condition for the loans. It also has to show it is committed to developing new vehicles that produce fewer harmful emissions.
Analysts had questioned whether Chrysler could survive without a partner. Most of its sales are in the U.S. market, where Chrysler posted a 30 percent drop last year.
(Additional reporting by David Bailey, Soyoung Kim, Helen Beresford, Claudia Cristoferi, Marcel Michelson, Gianni Montani and Emmanuel Jarry; writing by John Stonestreet; Editing by Jon Loades-Carter and Carol Bishopric)
