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Date : 09-05-12 10:43
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THE PLAN: Fiat Wants to Rival Volkswagen as Auto Manufacturer
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Writer :
Seojin Clutch
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Prior to leaving Turin, Italy, yesterday to meet today with German government officials, Fiat S.p.A. Chief Executive Officer Sergio Marchionne held a special meeting with his company's board of directors. He expressed his vision to them of a new global auto manufacturer and asked their permission to go make the vision a reality. That vision, Mr. Marchionne told German media in Berlin earlier today, is to create a new global auto company comprised of Fiat, Chrysler, Opel and Vauxhall that could achieve ¢æ80 billion ($106.7 billion) in revenues a year. He told the Financial Times the tie-up would be a "marriage made in heaven."
If this sounds like some half-baked expansionist scheme concocted on the adrenaline of Fiat's recent success in gaining an initial 20% stake in Chrysler, you're wrong. There are credible reports that Fiat executives have been negotiating with General Motors for months on the sale of Adam Opel, even prior to G.M.'s announcement that it would place the European business up for sale. And, it's reasonable to assume that Fiat is close to a deal with G.M., but in order to consummate the deal, Fiat needs the blessing of the German government.
Today's negotiations between Mr. Marchionne and German Economy Minister Karl-Theodor zu Guttenberg should be quite interesting. Herr Guttenberg, you may recall, made an unusual visit to the U.S. in mid-March, stopping first in Detroit where he met with G.M. officials, including Rick Wagoner, and then traveled to Washington where he met with the automotive task force and Treasury Secretary Timothy Geitner. At the time, Guttenberg characterized the trip as a fact-finding mission.
Marchionne has his work cut out in Germany. In recent weeks, political activists have cringed at the thought of an Italian firm owning a German company and Opel's strong and heavy-handed labor unions have voiced objections to the company being sold to Fiat. Concerns that Fiat would close German plants and move production to Italy are shared by the government and the unions. There are also fears of job reductions at Opel, perhaps as many as 9,000 jobs, but both the government and the union will have to realize that whoever buys Opel, jobs will most assuredly be lost. Marchionne recently offered the Germans his assurances that none of Opel's plants would be shuttered and he even offered to move some Fiat production to an Opel assembly plant. Even those assurances, however, haven't quieted Germany's concerns.
What Marchionne has going for him is that there isn't anyone else offering G.M. the rumored $1 billion plus for a majority stake in Opel. German media are reporting that Magna International are interested in Opel but as we noted last week in a report, the majority of Magna's funds would come from Russian banks controlled by Russian tycoon Oleg Deripaska. All of that gets very complicated, perhaps too complicated for Germans.
If a deal for Opel does come together, it's likely to happen before G.M. slips into bankruptcy. No buyer, Fiat nor Magna, wants to deal with the bankruptcy court in negotiating a sale. Our last statement, of course, assumes G.M. slips into bankruptcy, which we think it will.
[Automotive NewsWire, 2009/05/04]
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