Sergio Marchionne, CEO of Chrysler, said that Chrysler plans to introduce a Fiat in the U.S. powered by natural gas. Bloomberg/Businessweek quotes Marchionne: "Natural gas engines offer a better way to cut emissions because they are cheaper than competing technologies."

Fiat is the leader in Europe in natural gas engines with 80% share of methane powered cars and 55% of light commercial vehicles. Alfredo Altavilla, quoted in Bloomberg/Businessweek said natural gas is a "more affordable solution" as it is less expensive to produce transport and distribute compared with other fuel sources.

Analyst Upgrades

• Berstein upgraded Diamond Offshore (DO) to market perform from underperform based on valuation. The firm has a $69 price target on the stock.
• Jefferies upgraded Patterson-UTI Energy (PTEN) to buy from hold, citing leverage to higher land rig pricing. The firm raised its price target to $21 from $17.
• Wunderlich upgraded Renasant (RNST) to buy from hold following the company's acquisition of Crescent Bank. The firm raised its target for shares to $20 from $15.
• AT&T (T) was upgraded to buy from hold at Deutsche Bank.
• Blackstone (BX) was upgraded to buy from neutral at BofA/Merrill.
• Scripps Networks (SNI) was upgraded to overweight from equal weight at Morgan Stanley.

On Wednesday, Chrysler CEO Sergio Marchionne announced that he has designed a five-year plan for the automaker (Wall Street Journal, subscription required). Marchionne believes the restructuring will be slow initially, but should improve "significantly" next year.

We should receive the plan by the end of November, and Chrysler will start reporting its quarterly results by the end of the year. Marchionne stated, "We are going to become a normal reporter in the U.S. hopefully by the end of 2009. ... You will see numbers like you see for everyone else." One can only assume that this is one of the "whole pile of surprises" Marchionne promised back in June when Fiat took over Chrysler.

Analyst upgrades:

• Kaufman Bros. upgraded Computer Sciences (NYSE: CSC) and Cognizant (NASDAQ: CTSH) to Buy from Hold on better demand trends as it believes overall enterprise IT spending is turning more positive. The firm raised its target on Computer Sciences to $62 from $54 and on Cognizant to $45 from $42.
• Citigroup upgraded E-Trade (NASDAQ: ETFC) to Buy from Hold as it believes loan less trends have improved and the company could potentially be acquired. Citi raised its target on shares to $2.30 from $1.50.
• Auriga upgraded Microsoft (NASDAQ: MSFT) to Buy from Hold as it believes consensus expectations for 2010 are too low, but admits the company's Q1 results could be fairly weak. Auriga believes Microsoft is coming up to its "most powerful product cycle in many years" and raised its price target on shares to $30 from $24.
• Motorola (NYSE: MOT) was upgraded to Buy from Neutral at UBS.
• Fidelity Southern (NASDAQ: LION) was upgraded to Neutral from Reduce at SunTrust.
• Sonoco Products (NYSE: SON) was upgraded to Buy from Neutral at BofA/Merrill.

Former Chrysler CEO Lee Iacocca has decided to weigh in on the current situation at his former employer, when interviewed by the Associated Press. Iacocca believes that the automaker needs to get the government out of the business as soon as possible, noting that government intervention is "strong motivation to repay the loan early." Iacocca added that the government "oversight is just too extreme." He reminded readers how Chrysler repaid the previous ten year loan from the government in three.

Chrysler and General Motors (OTC: GMGMQ) are have both received billions of dollars in government loans. Chrysler has recently exited bankruptcy protection, while GM remains in Chapter 11. The Treasury Department's auto task force has already made its presence felt, forcing out both CEOs and is reshaping their boards.

There's new boss at Chrysler, and his name is Sergio Marchionne. On the job just a few days, Mr. Marchionne has shown that he plans to run a tight ship at Chrysler. His first move was to appoint powerful divisional heads with profit and loss accountability.

He has initiated a top-to-bottom shake-up, naming 23 executives who will report directly to him. Some of the 23 are from Fiat and others were promoted within Chrysler.

The U.S. Supreme Court has ruled that Chrysler's sale to Fiat can proceed. Over the past week we thought that Chrysler's bankruptcy was almost over. But then a group of Indiana pension funds filed suit with the court to delay the sale.

At issue was $42 million of $6.9 billion of secured debt. The pension funds held that Chrysler's offer of 29 cents on the dollar violated their creditor rights.

A United Auto Workers union health care trust, a more junior unsecured debtor, would receive 55% equity stake. This deal was much more favorable than the offer to the Indiana pension funds.

Three separate requests filed in Indiana by pension funds and consumer groups have asked the U.S. Supreme Court to stop the sale of Chrysler to a group led by Fiat. The groups filing the complaints hope to buy some time while challenging the deal. Some believe that this case could set a precedent for General Motors, which is trying to employ a similar "quick-sale" strategy as Chrysler. Late Friday, an appeals court stayed the closing of the sale until this afternoon, which gave the pension funds and opponents the weekend to make their plea to the Supreme Court.

The three pension funds argued that the sale of Chrysler unlawfully rewarded unsecured creditors, like the union rather than secured lenders. The funds hold roughly $42 million of Chrysler's $6.9 billion in secured loans. Lawyers for the pension funds argued, "the need for the court to review the profound issues presented by Chrysler's novel bankruptcy sale far outweighs the cost of delaying [a sale]."

Bankrupt Chrysler LLC is rushing to sell its assets as fast as possible because it wants to close a deal with Fiat SpA, possibly by Friday noon. Chrysler terminated the franchise agreements of 789 dealers and is now forced to liquidate that inventory.

Chrysler filed for bankruptcy on April 30 and all plants have been closed since May. Yet during that time Chrysler reported strong retail sales, much of it coming from dealers who are closing.

Customers who are buying are looking for fire sale prices. Discounts of $8,000 on 2008 models and $4,000on 2009 models are enticing customers even more. Plus there are added discounts for loyal Chrysler customers and those financing through credit unions, and 0% financing through, ironically, GMAC.

If you compare last month to May 2008, then Ford Motor Company (NYSE: F) looks pretty shaky: the American auto maker posted a 24% dip in sales year over year. However, the picture starts to look a lot better once you compare April and May of this year.

All in all, Ford sold 161,197 vehicles last month in the U.S.. Yes, this was 24% off the pace it set last year at this time, but it does mark a pretty impressive 20% jump over its numbers during the previous month, as the company was able to take slight advantage of its competitors' financial woes.

According to the Financial Times, General Motors (NYSE: GM) expects "as many as three bids" for a strategic stake in its European arm by today's deadline. GM Europe spokesman Chris Preuss stated, "Based on conversations that are ongoing, the expectation is that there will be three bids put on the table." GM expects to rake in $887 million for the division.

The report quotes "two people close to the deal, who requested anonymity" as saying the three bids could come from Fiat, Canadian parts manufacturer Magna, and Brussels firm RHJ International.

Early this morning, the Associated Press reported that talks between Chrysler's lenders and the Treasury Department had "disintegrated." The parties were trying to lower Chrysler's $6.9 billion in secured debt, a move that many hoped would stave off bankruptcy.

It appears that the hedge funds (roughly 40 of them) that hold roughly 30% of Chrysler's debt are looking for a deal better than the one struck between the banks and the government. The four banks that hold 70% of the automaker's debt agreed to erase that debt for $2 billion -- the hedge funds want more.

It's beginning to look like the cozy little plan of salvaging Chrysler through an investment from Italy's Fiat is going to fall flat on its face. And if it does, this will leave the U.S. in an awkward position. Instead of forking over another $77 billion to get General Motors Corp. (NYSE: GM) over its bankruptcy hump, it will need to deal with Chrysler as well. And that could mean more taxpayer money going to finance a merger between the two.

A few weeks ago, it looked like Fiat would give access to technology, platforms and research worth $10 billion in exchange for a 35% ownership stake in Chrysler -- thereby taking some heat off the U.S. government. Chrysler has already received $4 billion in U.S. loans, but that will only last for two more weeks, so it wants $9 billion more.

Reports have surfaced in London that Italian automaker Fiat is ready to walk away from the Chrysler deal. The bone of contention is high labor costs. The Italian firm has given the U.S. auto firm and Canadian and American labor unions until the end of the month to "significantly reduce labor costs." This revelation was made in an interview of Fiat's CEO Sergio Marchionne in the Canadian newspaper the Globe and Mail. Fiat wants Chrysler to lower the labor costs to Japanese and German plants levels.

The problem facing Chrysler is that the deal with Fiat is its last chance to stay out of bankruptcy. With Fiat ready to walk away from the deal, the North American unions had better agree to the demands or face some job losses. Let's not forget that Chrysler was given 30 days to complete the merger with Fiat or the American firm would be cut off from the government funding it is currently existing on.

Fiat probably hoped to get a 35% share of Chrysler without putting any skin in the game. Why would the Italian auto company expect that? May it is just naive. The US government is unlikely to let a foreign company get a piece of a US company for free, especially if the Treasury is writing the checks to keep the American company afloat.

According to The Wall Street Journal, "Chrysler LLC has found an international partner in Fiat SpA but the auto maker isn't out of the woods, mainly because the deal is contingent on Chrysler getting $3 billion in additional government loans."

Why should Fiat walk in and get a piece of a firm that could be turned around using taxpayer cash? The answer is that it shouldn't. The Treasury should insist that Fiat put at least as much money into Chrysler as it is.

Fiat is really not giving Chrysler much for its 35% in the US car company. It will help retool some plants and use them to build small cars that both companies will sell. Whether that helps Chrysler won't be known for some time. In essence Fiat is getting its stake almost for free.

Treasury may want to tell Fiat that bailout money is in short supply especially with the economy getting worse. Fiat ought to pay its own way if it wants to get a piece of the American car market.

Douglas A. McIntyre is an editor at 24/7 Wall St.