Fiat Looks To Buy Up GM's Euro Operations

Italian Car Maker Also Poised To Take Over Chrysler Could Become Global Auto Powerhouse

(AP)  Fiat Group SpA confirmed Sunday that it is in talks to buy most of General Motors Corp.'s European operations, taking another step toward creating a global automotive powerhouse.

Fiat also said it is evaluating the possible spinoff of its auto business to form the core of a new company.

Fiat Group Automobiles includes the Fiat, Alfa Romeo and Ferrari brands. In addition, Fiat is in the process of acquiring U.S. automaker Chrysler LLC without putting up any cash.

The new auto company, which according to Fiat would have $105 billion in annual revenue, would put the Italian automaker in markets where it has little or no presence, including North America, traditionally the largest market in the world.

"They're going to be a global powerhouse, I guess. Who would have thought?" asked Erich Merkle, an independent auto industry analyst in Grand Rapids, Michigan. "They seem to be on a buying binge right now, looking for cheap and distressed assets like Chrysler and Opel."

The Chrysler deal, which must still be approved by a U.S. bankruptcy court, would be in exchange for giving Chrysler access to Fiat's small-car and engine technology. Chrysler cars and trucks also would be sold by Fiat through its global distribution network.

The deals would make Fiat a big global player, but that might not be the best thing for the Italian automaker, which might be overreaching with the acquisitions, said Merkle.

"This is a lot to take on, quite honestly," Merkle said. "When you start looking at Chrysler, it'll make them a very large automaker, but we've seen that large isn't necessarily indicative of success."

It will take years, Merkle said, for Fiat to gain any synergies by globalizing design, engineering and manufacturing operations with Chrysler and the GM units.

The Fiat statement was issued on the eve of a meeting in Berlin between Fiat CEO Sergio Marchionne and the German economy and foreign ministers to discuss Fiat's offer for GM's German unit, Opel.

GM Europe also includes the British company Vauxhall and the Swedish carmaker Saab. Saab may not be included in the deal, however. The company is being reorganized under Swedish law and is likely to be separated from the rest of GM's European operations.

GM Europe spokesman Frank Klaas said the company has several possible investors, which he wouldn't identify, but said, "we are in very good negotiations with them."

GM also makes and sells small Chevrolet-badged cars in Europe that are designed in South Korea by the company's Daewoo unit, and it's unlikely to sell that because that would be GM's only remaining foothold in Europe, Merkle said.

General Motors has been trying to find investors for its noncore and unprofitable assets as part of a restructuring in which it has received $15.4 billion in aid from the U.S. government to avert collapse.

Opel has said it needs $4.3 billion to get through the economic crisis. The German government has said it doesn't foresee giving direct state aid. Chancellor Angela Merkel has suggested the government could help an Opel investor with loan guarantees.

Fiat said that over the next few weeks, Marchionne will be looking "to assess the viability of a merger of the activities of Fiat Group Automobiles (including the interest in Chrysler) and General Motors Europe into a new company."

"As part of this process, the group would evaluate several corporate structures, including the potential spinoff of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe."

In an interview Sunday with Corriere della Sera, Fiat Chairman Luca Cordero di Montezemolo called GM's Opel an "ideal partner" and a possible takeover by Fiat an "extraordinary opportunity."

Fiat is not the only suitor for Opel, however. Last week, Canadian car parts maker Magna International Inc. presented German Economy Minister Karl-Theodor zu Guttenberg with what the minister called a "rough concept for a commitment with Opel."

Guttenberg has said the German government would wait to determine its role in any full or partial Opel sale until after the U.S. government had weighed in.

Fiat, meanwhile, has pressed ahead with a takeover of Chrysler. Chrysler is seeking to sell substantially all of its assets to Fiat, but must gain approval from a New York bankruptcy court.

In addition to Fiat Group Automobiles, the Fiat Group also includes its agricultural vehicles branch CNH and its Iveco trucking unit, as well as a media arm.

[sero5]

Renault is French, Fiat is Italian.

[ayatoldya]

Fiat! Isn't that the French foreign car company that couldn't last a decade in the US car market because their cars were so shoddily built? I guess in keeping with Fiat's low degree of quality, GM will fit right in their car manufacturing model.

That is why GM is considering dropping Saab, because despite their best attempts to "Americanize" them, Saabs are so well engineered they work outside GM's business model of obtaining 75% of their profits from a car in maintenance and services.

[incog-nito]

I agree, American management has been behind the curve for decades. It is like they don't think that they have to manage, everything will just take care of itself.

Posted by sjc_1 at 8:46 AM : May 4, 2009

Their goal has always been to garner the biggest pay and bonuses possible, to pay themselves first to matter how poorly their company does. In that regard they have been wildly successful.

[sjc_1]

I agree, American management has been behind the curve for decades. It is like they don't think that they have to manage, everything will just take care of itself.

[au_fait]

Looking forward to having Alfa back in the US. Their cars have usually had graceful and beautiful lines. Whether on the road or sitting in the mechanics bay. Hopefully reliability has been improved.

[walt1944]

I can remember back in the 1980's when Renault took over American Motors.

AMC didn't make a durable product to begin with, but when Renault took them over, their quality went from zero into ngative territory.

I should know, I had an AMC/Renault Encore brand new for 18 months and the thing was a pile of junk from the start. It was poorly designed and had dozens of problems, from overheating to the transmission belching up transaxle fluid all over the transaxle. I don't know how many times I had it back to the dealer, and he finally threw up his hands with the thing, saying all the Encores and Alliances were doing the same thing and no one at AMC had any idea on a fix for them.

So, I look at this Chrysler/Fiat thing as the END of Chrysler and there will only be Ford and GM left, unless GM can't get thru bankruptcy, which is a real possibility since GM doesn't build much of a quality product either.

HAIL OBAMA!!!!

[antoniof123]

Failed American Management, if you don't move out of the 19th century you will fade away to a memory just like time itself.

[jetjt1]

does this mean that in the near future my family of four will need to drive two fiats/gms to go anyware, can't stand getting into or out of a little car

[WayAround]

From Google Finance: "OAO Sberbank, Russia's biggest lender, and OAO GAZ, its second-biggest carmaker, are joining Magna International Inc. in a bid for a stake in General Motors Corp." (specifically, Opel...the same piece that Fiat wants).

What a circus. Two garbage carmakers (Fiat and OAO GAZ) both fighting for Opel. Which Hollywood script writer dreams up this cr*p?

[lovegetpeace]

The only thing with 'Made in USA' are Guns and Assault Rifles.

These useless weapons are used only to Re-Sell them at a Lucrative Profit to Drug Traffickers whom used them on the Violent Streets of Americans. Today, nobody and nowhere is safe.

[lovegetpeace]

What else is left with 'Made in USA'?

Anyone with any American's Pride and Ego should seek Professional Counseling.

[grabandgo]

Fix It Again Tony!

[J_G_H]

It sounds like Fiat is being run by an empire builder, someone whose ego or compensation package drives acquisitions rather than good business sense. Buying Chrysler might make sense, Buying GM's Eurpean operations might make sense, Buying both seems overly ambitious. The finances are an issue, but also empire builders tend to run into problems mreging corporate cultures.

[j_flood]

Sergio - careful now, you might think the UAW was a stickler wait till you're on with IGM - good luck - work away!

[WayAround]

"The new auto company, which according to Fiat would have $105 billion in annual revenue"

Can everybody say "Too big to fail"?