DETROIT (Reuters) -- A growing team of Fiat S.p.A. executives and engineers has been working at Chrysler's suburban Detroit headquarters this week, finalizing plans to cut costs and ready the Fiat 500 small car for the U.S. market, people with knowledge of the work said.
Fiat CEO Sergio Marchionne, who is expected to take over operational control at Chrysler, has been leading the team from the Italian automaker, according to the sources. They asked not to be named because a deal to link the two companies under Marchionne has not been cleared by U.S. courts.
A Chrysler spokeswoman was not immediately available for comment. Fiat had no comment.
A federal appeals court will hear arguments on Friday from three Indiana state pension funds looking to block the sale of most of Chrysler's assets to a group led by Fiat.
Chrysler has been operating in bankruptcy with the backing and financing of the U.S. Treasury since April 30.
The plan brokered by the White House-appointed auto task force is for the UAW to take 55 percent of a reorganized Chrysler in a deal that has been on track to close this month.
The U.S. government and Canadian government would hold a combined 10 percent stake.
Fiat would obtain 20 percent of Chrysler in exchange for bringing its small-car technology and management to the U.S. automaker. Fiat's stake would rise to 35 percent over time as it meets benchmarks in the company's turnaround.
But in advance of the closing of the Chrysler deal, Marchionne has been leading an effort involving several dozen executives from Italy intended to drive cost savings on parts purchasing and to smooth the way for the introduction of the Fiat 500 to the U.S. market.
The 500, smaller than BMWs Mini, is expected to get more than 40 miles per gallon as measured by U.S. regulatory standards.
The car was the centerpiece of Fiat's pitch to U.S. officials that it could help reinvent Chrysler and break its dependence on heavier pickups, minivans and SUVs.
Plans are for the 500, named Europe's car of the year for 2008, to be brought over to Chrysler's U.S. dealers 18 months after the work on readying it to meet U.S. safety standards began, the people with knowledge of the effort said. That aggressive timetable is intended to bring the 500 to U.S. showrooms by the end of 2010.
The plan is for the 500 to be the first new product introduced by Chrysler under the still-pending deal with Fiat, the sources said.
New York stage
In April, before Fiat had sealed a deal to take its controlling stake, Chrysler President Jim Press promoted the 500 by driving one onstage for his appearance at a New York auto show press conference.
Press, speaking to reporters on Wednesday in Washington, said work had already begun to produce a range of new vehicles based on Fiat vehicle architectures and powertrains.
A separate team of Fiat engineers has been working with Chrysler to examine plans for vehicles still in development part by part to see where the two companies can begin to share components to bring down costs, sources said.
One potential complication of that effort is the deep drop in Chrysler sales this year.
Chrysler's 2008 sales were near 2 million vehicles, which, combined with Fiat's 2.2 million vehicle sales, would have created a combined automaker with global sales near Hyundai Motor Co., projections prepared by Fiat showed.
But Chrysler's sales in the United States have plunged by 46 percent through the first five months of the year. That is a problem because the U.S. automaker has relied on the U.S. market for almost 90 percent of its overall sales.
Auto suppliers have been hurt by the sharp decline in industry production volume. In a further blow, Chrysler opted to shut down all of its factories during its bankruptcy.
Restructuring advisers and analysts have said many of the smaller and privately held suppliers could face a cash crunch as auto production picks up and they are asked to bring workers back and restart plants.
"Our production for our company will start by the end of June, Chrysler's Press said on Wednesday.