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The Italian job
Ambitious Opel/Vauxhall deal could make Fiat the world’s second-largest car-maker
5 May 2009
FIAT may have no money, but the ambitious Italian company is poised to become the second-largest car-maker in the world under a deal that would add Opel, Vauxhall and Saab to its portfolio.
Having already picked Chrysler off the scrapheap in a cashless deal, Fiat CEO Sergio Marchionne travelled to Germany on Monday to negotiate a similar takeover of embattled GM’s three European brands.
Playing a cunning political game, he aims to persuade European governments nervous about job losses to provide the minimum $A9.1 billion necessary to pay for GM’s debts and pension obligations.
The proposed deal would leave Mr Marchionne in control of an empire with an annual turnover of $A145 billion and producing more than five million vehicles globally – second only to Toyota.
Mr Marchionne, who has long argued that Fiat is too small on its own, said that “from an engineering and industrial point of view, this is a marriage made in heaven”.
While some observers question the viability of bringing together companies that have individually struggled to make money, the market has reacted positively to Fiat’s boldness, doubling the company’s stock price in the past two months and spiking it again on news of the GM deal on Monday.
Left: Fiat CEO Sergio Marchionne.
Just four days after clinching the Chrysler deal, Mr Marchionne travelled to Berlin to convince German economy minister Karl-Theodor zu Guttenberg of the benefits of creating a new Fiat Group company that would include Opel, Vauxhall, Saab and Chrysler.
The minister – whose government faces an election in September – sought assurances that Opel, which employs 25,000 people in Germany, would retain its headquarters and three vehicle plants there, although its engine plant remains under threat.
“It is an interesting approach, without question,” Mr Guttenberg told reporters after meeting Mr Marchionne.
And a decision could come quickly as Mr Guttenberg agreed that Opel’s future could be determined by the end of this month.
“I don’t rule that out,” he said. “The decision cannot be pushed back forever.”
Mr Guttenberg said that “Fiat wants to get into this deal without debts of its own”.
He said the Turin-based company estimates the short-term financing needs at €5-7 billion ($A9.1-12.7 billion) Europe-wide, which could be covered by loan guarantees from various governments.
“This is a real opportunity to make the European Union work as a union,” said Mr Guttenberg. “If we don’t do this, it’s a failure of our efforts to create a single market.”
Although the minister also held talks with Austrian-Canadian car parts giant Magna International last week, he concedes that the decision is GM’s to make, but government funding is clearly a vital ingredient in the future of GM’s subsidiaries, which together have 54,500 employees in Germany, Britain, Belgium, Poland, Spain and Sweden.
In Stockholm, the Swedish government confirmed it had also been in contact with Fiat, among other potential suitors.
GM CEO Fritz Henderson told the Associated Press that negotiations with Fiat about its European operations were mainly focused on the Opel and Vauxhall brands.
“We are talking to them, amongst other parties,” said Mr Henderson. “Not solely Fiat, but several parties who have an interest in making investment in our European business.”
Mr Henderson said it would not be appropriate to discuss Fiat’s interest in Saab, but said GM has a “panoply” of investors interested in the struggling Swedish brand.
Meanwhile, Fiat’s proposed Chrysler takeover is being challenged by investment funds that claim Chrysler’s sale and bankruptcy were “orchestrated entirely by the US treasury and foisted upon the debtors” to wipe out the company’s $US6.9 billion ($A9.3 billion) debt.
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