The deal, first reported by well-wired Detroit pundit Peter DeLorenzo on his Autoextremist blog last week, and since confirmed in follow-up reports by The Wall Street Journal and Bloomberg, could be announced as soon as this week, say the reports.
What the reports say about the deal: Talks between the two companies about a deal described as an "advanced technical partnership" have been ongoing for several months. Google is also believed to have approached both Ford (NYSE:F) and General Motors (NYSE:GM), but it appears poised to proceed with FCA.
The partnership would begin with the construction of several self-driving prototypes of FCA's new Chrysler Pacifica minivan. But that's just the first phase: Some level of Google technology could begin to appear in production versions of the Pacifica as soon as the fourth quarter of 2016, and the strong hint is that the deal will have several phases and continue for at least a few years.
Why would Google chose Fiat Chrysler?
Google Cars chief John Krafcik, an auto-industry veteran, has said repeatedly that Google doesn't want to get into the (expensive, low-profit-margin) business of manufacturing cars. Instead, it will look for opportunities to supply its self-driving technology to established automakers.
But why choose Fiat Chrysler, perhaps the least technically advanced of the major automakers? I suspect that's actually the reason: Ford and GM (and most of their European and Japanese rivals) have fairly advanced self-driving research-and-development programs of their own. They don't need Google -- and that means they don't need to agree to Google's terms.
Why might they balk? It's a safe bet that those terms include control of (or at least complete access to) the extensive data harvested by the self-driving systems. As with cell phones, the data collected by self-driving cars is expected to be quite valuable for (among other things) what it reveals about individuals' habits and preferences.
(That may sound sinister, but it's more likely to be about advertising opportunities: If your car tells Google that you favor a particular chain of coffee shops, Google [and the coffee-shop company] might offer you a coupon from time to time, or automatically point you to the company's nearest shop when you're in an unfamiliar area.)
Automakers are wary of the example set in the smartphone industry, where Google's control of the Android operating system has meant it's able to capture the bulk of profits associated with the sale and use of Android smartphones. No automaker wants to be reduced to an even-lower-margin commodity maker of hardware if it can avoid it -- and it's a safe bet that GM and Ford, run by executives who are well aware of the threat of "disruption" from Silicon Valley, were unwilling to turn over control of their cars' user experiences and data to Google.
Why Fiat Chrysler would embrace Google
FCA is in a much weaker position than Ford or GM. Right now, the company's finances and resources are stretched paper-thin while it implements CEO Sergio Marchionne's aggressive five-year plan -- a plan that does not call for significant investments in self-driving technology (or electric cars, for that matter).
For Marchionne and his team, a deal with Google could represent a quick way to put FCA in the forefront of self-driving innovation without having to spend billions of dollars on research and development. As he scrambles to keep pace with much more financially secure rivals, that potential might well make any concerns about data control seem trivial.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Ford. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.