Fiat and Chrysler have joined forces.
Under the terms of the deal, Fiat will get a 35% stake in Chrysler in return for access to its fuel-efficient vehicle technologies. Fiat will also use the alliance to extend its presence in the US market.
Chrysler is one of two troubled US-based car makers to have received emergency US Government loans following a dramatic drop in sales. The other is GM.
The $4bn (2.7bn) emergency aid from the US Government was given in a deal to help Chrysler stay in business.
A statement issued by the two car makers said the union with Fiat would allow Chrysler to achieve 'substantial cost saving opportunities'.
It went on: 'Fiat has been very successful in executing its own restructuring over the past several years.'