Fiat Has a Year to Decide on Chrysler Stake: Source

Italian industrial group Fiat will decide in a year whether to take another 20 percent of troubled U.S. car maker Chrysler for $25 million, a source close to Fiat told Reuters on Wednesday.

In a preliminary agreement announced on Tuesday, Fiat is to take 35 percent of Chrysler in exchange for its expertise in making small cars. This initial stake will not cost Fiat any money.

In the next 12 months, Fiat will decide whether Chrysler has a chance to survive as a going concern.

"If Chrysler looks like it will get through the crisis they will draw the necessary conclusions and decide what to do," the source said on condition of anonymity.

Looking for a Loan

Chrysler's deal to strike a partnership with Fiat by granting it a 35 percent stake depends on Chrysler getting $3 billion in additional loans from the U.S. government, the Wall Street Journal reported citing people familiar with the deal.

The deal announced Tuesday only becomes binding if Chrysler gets $3 billion more in financial help from Washington, the Wall Street Journal wrote.

(Discussing a Chrysler-Fiat alliance. Watch the accompanying video for more...)

To meet the Treasury's terms for loans, and to qualify for an additional $3 billion in aid, Chrysler needs to devise a plan by February 17 that shows how it intends to return to profitability.

All Chrysler's plants have been shut temporarily since before Christmas, and dealers have been scaling back orders as sales declined steeply over the past months.

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