Fiat will buy out the remaining stake the profitable US car maker Chrysler, it has emerged today. Fiat shares jumped today after it reached a $4.35 billion deal to take complete control of Chrysler.

Under the deal Fiat will buy the 41.5% stake of the third largest US car maker that it doesn't already own. It has been able to do so without having to raise funds from the stock market.

Fiat boss Sergio Marchionne has run both auto firms since Chrysler's 2009 Obama backed Chapter 11 bankruptcy and restructuring, and will now combine the two firms into the seventh largest auto firm in the world.

Fiat will buy the stake from a United Auto Workers union healthcare trust. The trust picks up $3.65 billion of cash in the deal, with $1.9 billion coming from Chrysler and $1.75 billion from Fiat. In addition, Chrysler has stated that it will give the UAW trust $700 million more over the next three years.

On first sight this seems like a good move for Fiat and it's little wonder that Fiat shares have risen today on the back of the news. The fact that Marchionne has paid less than expected and has not had to raise funds form the stock market has gone down well.

Chrysler has been doing well of late, having been rescued by the Obama government, and the tie up with Fiat has helped both firms. The idea is that in the future the sharing of platforms, technology and components will enable the new combined entity to reduce costs and compete more effectively with bigger players like VW.

But I still wonder if the takeover will help Fiat cut its heavy European losses. Fiat has promised to break even in Europe by 2016 but this really depends on how well those 'synergies' between Fiat and Chrysler can be reaped and how quickly.

This European turn-around plan depends on the ability of Fiat-Chrysler to share technology, component sourcing, logistics, brands, cash and dealer networks. That needs to be done quickly and efficiently.

While a restructured Chrysler now makes money, Fiat has been badly damaged by the European downturn given its exposure to both the Eurozone periphery (where car sales have been down hugely in recent years) and by being in the 'squeezed middle' of the European car market. It has been attacked from below by budget brands and from above by premium players. That squeeze will only get tighter over time and new budget entrants from China and India come into the market.

But the deal has raised hopes that Fiat will now invest in its hugely under-utilised Italian factories so as to build Jeeps and new Alfas for export beyond Europe. Marchionne seems to have pegged his hopes on exports saving the firm given the dire state in particular of the Italian market and the fact that the embryonic European car market recovery may not benefit Fiat as much as other players with premium brands like VW.

What's more, the deal leaves Fiat hugely indebted when the European market is pretty moribund despite this nascent pick up from a 20 year low. Indeed, after the deal, the firm's net debt will rise to some 10 billion euros (almost $14billion), making Fiat-Chrysler the most heavily indebted car assembler in Europe. That's a big debt burden to be carrying.

I can't see this being enough on its own to give Fiat the scale to generate revenue to plough back into new model development given this debt pile. I still think a further tie up and perhaps an equity stake by an outside investor- perhaps even with a Chinese auto firm - will be needed to get debt down and to give scale to exploit volume economies across brands. This isn't the end of the story.

Nevertheless, the Chrysler deal should be seen as a good start for Fiat in 2014.

* Professor David Bailey works at the  Aston Business School  in Birmingham.