News - Fiat

Fiat planning a six-million unit behemoth

Global thrust: The Fiat 500 platform is expected to be one of about six to form the nucleus of a Fiat/Chrysler/Opel model empire.

Fiat’s Marchionne wants to span the globe with Chrysler, Opel

Fiat logo12 May 2009

FIAT chief executive Sergio Marchionne is pursuing General Motors’ Opel subsidiary and other parts of GM so he can create a global industry leader second only to Toyota in annual production.

Success with the Opel chase would create a multinational group with extensive production operations in Europe (Fiat, Opel and Saab) and the US (Chrysler). He is also keen to wrap in GM’s South African and South American operations.

Mr Marchionne believes this expanded Fiat/Chrysler/Opel group would be able produce around six million cars and light commercial vehicles a year, which he thinks will be the threshold for a viable mass producer in coming years.

To stabilise the new conglomerate in the current environment, Mr Marchionne will have to curtail production and lay off some people, but he has told the German government he was willing to preserve jobs in return for government loans.

Mr Marchionne, who has confirmed he will head the combined group once Chrysler comes out of bankruptcy proceedings, is convinced that combining Fiat/Chrysler with the Opel/Vauxhall business would be the best result for the struggling GM subsidiary, which would be sub-economic on its own in coming years.

“I am offering the German government a car business that will effectively be debt-free and I will take on Opel’s liabilities, including pensions,” Mr Marchionne declared after presenting his plan to the German government on May 4.

But his plan depends on the availability of government loan guarantees, he said.

 center imageFiat CEO Sergio Marchionne.

Mr Marchionne said the proposed Opel deal rested on the willingness of European governments, particularly the German government, to provide between €5 billion ($A9 billion) and €7 billion ($A12.5 billion) in loan guarantees to cover GM Europe’s unfunded pension liabilities and debts.

GM chief executive Fritz Henderson underlined this in a press conference on Monday when he said there was an “important and urgent” need for government funds at Opel.

He also seemed to be planning for GM to stay as a partner in Opel/Vauxhall, rather than sell it outright, which would finally bring GM and Fiat together, albeit in a different form to that planned eight years ago, when it was GM planning to buy a controlling stake in Fiat.

The negotiations with European governments will be delicate, however, as Mr Marchionne recognises that the combined production capacity of Fiat and Opel will have to be reduced by around 22 per cent.

He said this would be achieved by slimming down Opel’s three German assembly plants, although there were no undertakings about keeping plants open in Belgium and the UK.

Slimming rather than closing the German assembly operations means the group would miss out on savings of about €250 million ($A447 million) a year, but that may be the price of receiving the desired German loan guarantees.

Even so, the combined Fiat/Opel group would save around €1 billion a year in product development costs, he said. The aim was to make at least one million units on each platform that was in production.

“We can achieve convergence on all the big platforms by 2012. Ultimately I need to do this with Chrysler, but Opel gets me there much faster and with more immediate returns,” he told The Economist magazine.

If he can pull Opel and Chrysler and Fiat together, Mr Marchionne’s envisaged group would have shareholders including the Agnelli family – which will retain the industrial side of the Fiat group, as well as Ferrari and Maserati – General Motors and the United Auto Workers of the US, which is to receive a swag of Chrysler shares in part settlement of Chrysler’s health fund liability.

All up, he believes annual revenues would be around €100 billion from the sale of six million vehicles, enough to maintain the new group’s viability.

Mr Marchionne rejects accusations that his big idea is really all about him being an empire builder looking to achieve his dreams with taxpayers’ money.

“It’s just nonsense,” he told the magazine. “Fiat Group employs 200,000 people, but I am going to carve out the car business and let the rest of it go its own sweet way.

“It’s not about me. Let’s just fix the industry. I am only a conduit for change.

“You can’t just have Toyota on its own. We need this to guarantee survival. Now it’s up to others.”

Read more:

Way cleared for Fiat/Chrysler deal

The Italian job

Bankrupt Chrysler seals Fiat deal

Unions pave way for Chrysler survival deal

Click to share

Click below to follow us on
Facebook  Twitter  Instagram

Fiat articles

Motor industry news

GoAutoNews is Australia’s number one automotive industry journal covering the latest news, future and new model releases, market trends, industry personnel movements, and international events.