Fiat slides on fears Chrysler alliance may increase costs

MILAN: Fiat SpA dropped to the lowest in at least 24 years in Milan trading after analysts said the automaker���s planned alliance with Chrysler LLC may increase costs and saddle it with a share of the US company's losses.

Italy's largest carmaker fell as much as 4.8% to 4.21 euros, the lowest since at least January 2, 1985, and was priced at 4.26 euros as of 12:12 pm local time. Fiat lost 1.3% on Tuesday after earlier jumping 6% on news that it had agreed to take a 35% stake in Chrysler.

While Turin-based Fiat will hand over no cash for the holding, the stake indicates the company may have to book losses from Chrysler with no immediate reward, Natixis Securities analyst Georges Dieng said in a note, reiterating a "reduce" rating.

UBS AG, an adviser to Fiat on the Chrysler partnership, said the deal is unlikely to offer major short-term benefits.

"Terms of the alliance imply some "option" value but minimal operating benefits," London-based UBS analyst Philippe Houchois said in a note. Houchois reiterated his ���neutral��� rating and cut his price target to 5.1 euros from 6.5 euros.

Fiat has declined 7.2% this year, cutting the company���s market value to 5.12 billion euros ($6.61 billion).

The tie-up with Auburn Hills, Michigan-based Chrysler might also prove a distraction for Fiat Chief Executive Officer Sergio Marchionne and run up costs just as margins are narrowing, London-based Morgan Stanley analyst Adam Jonas said.