Is This Self-Driving Deal Bullish for Fiat Chrysler Automobiles?

Fiat Chrysler Automobiles (NYSE: FCAU) has finally joined the self-driving revolution.

The Italian-American automaker, which hasn't had a significant autonomous-driving research effort of its own, has agreed to join the self-driving research-and-development partnership established last year by BMW AG (NASDAQOTH: BAMXF), chip giant Intel (NASDAQ: INTC), and soon-to-be-Intel-subsidiary Mobileye (NYSE: MBLY).

The partnership intends to bring a scalable self-driving technology platform to market by 2021. Here's what we know about the deal, and what it could mean for FCA's long-suffering shareholders.

What the companies said about the deal

The companies said that FCA has "signed a memorandum of understanding" with BMW, Intel, and Mobileye, in which FCA will join that existing effort to develop an autonomous driving platform that will be made available to other automakers starting in 2021.

That technology platform will be scalable, meaning that it can be used for Level 3, Level 4, or (perhaps eventually) Level 5 applications. (The different levels of self-driving technology are shorthand for how much human involvement is necessary to drive the vehicle. The higher the level, the more a system can do without human help. Levels 4 and 5 are considered fully self-driving. You can learn more here.)

FCA's CEO, Sergio Marchionne, has tried to push the industry toward greater consolidation and increased sharing of advanced-technology development efforts. That came through in his statement about this deal: "In order to advance autonomous driving technology, it is vital to form partnerships among automakers, technology providers and suppliers. Joining this cooperation will enable FCA to directly benefit from the synergies and economies of scale that are possible when companies come together with a common vision and objective."

BMW CEO Harald Krueger seemed happy to welcome his company's rival to the effort: "The two factors that remain key to the success of the cooperation are uncompromising excellence in development, and the scalability of our autonomous driving platform. With FCA as our new partner, we reinforce our path to successfully create the most relevant state-of-the-art, cross-OEM Level 3-5 solution on a global scale."

FCA has lagged far behind on tech efforts

Old Detroit rivals General Motors (NYSE: GM) and Ford Motor Company (NYSE: F) have both made substantial (and very visible) progress toward Level 4 self-driving technology. But FCA has lagged. The challenge: Unlike Ford and GM, FCA has a lot of debt, and a lot of holes in its global product portfolio -- both of which have had priority claims on the company's limited cash.

Healthy automakers like Ford and GM (and BMW, for that matter) have been able to make big investments in future technologies like self-driving systems and electric drivetrains. Most in the industry (and many outside) see those two technologies as critical for any automaker that wants to remain relevant over the next decade or so, as potentially disruptive new entrants see opportunities to transform the traditional car business.

But FCA has lagged. While the company did work with Alphabet's Waymo self-driving subsidiary to create a fleet of test vehicles, it hasn't been able to make significant investments in either technology on its own.

Now, with this new deal, it has a clear path to acquiring self-driving technology.

So is it good news for FCA investors? 

FCA's inability (or at least unwillingness, given other priorities) to invest in these expensive future technologies has probably been a big factor holding back its share price. Despite a run-up earlier this week, FCA's stock is still trading at a paltry 4.5 times its expected 2017 earnings.

This move should help. The BMW-Intel-Mobileye partnership is a highly credible research and development effort that investors have taken seriously. FCA's move to join it should bump it up a notch in Wall Street's estimation -- and that should translate into share-price gains over time.

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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 GOOGL, GOOG, and Ford. The Motley Fool recommends BMW and Intel. The Motley Fool has a disclosure policy.