EUR: Fiat aims to create global car giant with GM tie up
04 May 2009 6:51 PM
MILAN, May 4 AFP - Fiat chief executive Sergio Marchionne on Monday outlined a plan to create a new global car giant that would link up with General Motors' European operations after rescuing bankrupt Chrysler.
"From an engineering and industrial point of view, this is a marriage made in heaven," Marchionne told the Financial Times in an interview published on Monday ahead of talks with German ministers on his proposal, which he wants completed by the end of May.
Fiat's share rose by more than six per cent to 8.02 euros on the Milan stock exchange on Monday after news of the plan was released.
Opel of Germany forms the core of GM's European operations, which also include Vauxhall in Britain and Saab in Sweden, and Marchionne will need the backing of the German government for his ambitious plan.
The Fiat boss said the Italian carmaker and Opel would form a publicly traded company with revenues of about E80 billion ($A144.9 billion) and sales of six or seven million vehicles a year -- putting it on a par with Volkswagen, the world's second biggest maker behind Toyota of Japan.
The new company would make everything from gas-guzzling Jeep utility vehicles in the United States to Opel's mid-range cars and Fiat's tiny but successful Fiat 500.
"You are always taking a big gamble when you do something completely new," Marchionne told the Financial Times, which estimated that up to 9,000 jobs could be cut in the merger.
GM has 10 plants in Europe and Fiat has 11, mainly in Italy.
The Italian car boss chief wants to focus on merging the small and medium-sized operations of Fiat and GM Europe.
Fiat is to take a 20 per cent stake in the new Chrysler, the third largest US car maker, following its bankruptcy. The holding can be increased to a 51 per cent controlling stake from 2013 as long as Chrysler pays back massive state loans.
In Germany, according to IG Metall trade union official Armin Schild, a member of Opel's supervisory board, Fiat has prepared an offer of less than E750 million ($A1.36 billion) for Opel.
Schild opposes the deal, telling the Taggespiegel newspaper in an interview published on Monday that Opel "would not be strengthened but weakened and the domination over Opel would not end, it would be moved from Detroit to Turin".
The German government has said it will aid any new investor for Opel, which employs nearly 26,000 people in Germany. Marchionne will meet German Economy Minister Karl-Theodor zu Guttenberg, Foreign Minister Frank-Walter Steinmeier and Opel board members on Monday to discuss the idea.
Fiat said in a statement that it could spin off its car division, Fiat Group Automobiles, to join with Opel. Fiat and GM would remain as shareholders.
"Fiat/Opel sounds good to me," Marchionne told the FT, while adding: "If they want Opel first that's fine."
Marchionne, whose priority is the tie-up with Chrysler -- he is to start a tour of its US plants this week -- said he wanted a deal with GM completed in 30 days and the new company created in the three months after.
Fiat said in a statement released late on Sunday that the Italian company's board had given "total support" to Marchionne's initiatives.
Any Fiat-GM deal would need to overcome anti-trust hurdles as well as opposition from unions.
Opel union chief Schild said he prefered a tie-up with Canadian parts maker Magna, which he said has joined with Russian investors to propose putting E5 billion ($A9.06 billion) into a 50 per cent stake in a new Opel group.
