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Fiat in talks to buy GM Europe
By Daniel Schäfer in Frankfurt and John Reed in London
Published: April 23 2009 12:59 | Last updated: April 23 2009 17:15
Fiat (http://markets.ft.com/tearsheets/performance.asp?s=it:F) has expressed an interest in buying the European units of General Motors (http://markets.ft.com/tearsheets/performance.asp?s=us:GM), according to German government officials, as talks continue between the Italian carmaker and Chrysler, the privately-owned US carmaker.
Hendirk Hering, economy minister for the the German state of Rhineland-Palatinate, confirmed on Thursday that Fiat and Canadian car parts supplier Magna International (http://markets.ft.com/tearsheets/performance.asp?s=ca:MG.A)were among the interested investors for GM Europe, which includes the Opel and Vauxhall marques. A spokesman for the government of Hesse, where Opel’s headquarters are based, also confirmed this but cautioned that a decision was not imminent.
“There are a lot more interested investors than just Fiat and Magna,” he told the Financial Times.
A sale to Fiat would be strongly opposed by Opel’s powerful works council, which fears heavy job losses as overlaps between both carmakers are immense, as well as regional governments including Rhineland-Palatinate and Hesse.
Beside Fiat and Magna, several financial investors have also taken a look at the offer document for GM Europe.
Sergio Marchionne, Fiat chief executive, would not confirm or deny any interest in Opel, but said that his company would be a “willing player” in industry consolidation. He said that wrapping up a partnership with Chrysler by April 30 was the Italian carmaker’s primary objective.
“I have nothing to announce,” Mr Marchionne told analysts on a conference call when asked about his interest in GM’s European operations. “We have not had any direct conversations with Opel.”
Mr Marchionne said Fiat still aimed to bring its total volumes up to 5.5m-6m cars a year, compared with the 2m it produces now.
“The market conditions to do that are here, and Fiat is a willing player,” he said.
At the same time, Mr Marchionne said: “Chrysler is on the table, and Chrysler remains my first and foremost objective.”
Any investor in GM Europe would be asked to pay at least €500m ($652m), but the US carmaker would not realise any financial gain from this investment as the money would be injected directly into Opel and Vauxhall.
GM Europe has asked for up to €3.3bn in government guarentees to support such a sale. However, German government insiders said that any deal was still weeks away as there were still many questions about how Opel and Vauxhall could be split from GM.
A German task force made up of government officials and investment bankers from Lazard on Wednesday flew to Washington for further talks with the US government, people close to the situation said.
Earlier, Fiat denied reports it would invest directly into Chrysler or fund it in the future.
The Italian carmaker, which faces a US government-set deadline next week to conclude a partnership agreement with Chrysler, said final terms of the deal were still being negotiated with the Treasury and the carmaker’s other stakeholders.
Fiat, which agreed in principle in January to share technology, vehicles, and dealerships with Chrysler, said it still had no plans to invest any of its own cash in the partnership, which would see the Italian carmaker take an initial 20 per cent stake, to be increased in 5 per cent increments.
“The alliance [between Fiat and Chrysler] does not contemplate Fiat making an investment in Chrysler or committing to funding Chrysler in the future,” Fiat said.
The denial came as the Italian industrial group provided new details of its deteriorating finances.
The group fell to a net loss of €411m for the quarter, from a net profit of €427m a year ago. Fiat’s car division reported better-than-expected sales, but the group’s overall result was dragged down by sharply slower business at its Iveco trucks division and CNH, the construction and farm-equipment subsidiary.
Analysts had expected Fiat to lose about €70m in the first quarter, based on an average of their estimates.
Fiat said it still expected an improvement in most of its businesses over the course of the year, and that it would still report a net profit of more than €100m.
Analysts have warned of the potential cash-draining impact on Fiat of a partnership with Chrysler, while some of Chrysler’s creditors are pushing it to make a direct investment in the carmaker as the cost of taking a 20 per cent stake in the US group.
Fiat on Thursday said that its cash balance was €5.1bn at the end of the first quarter, up from €3.9bn at the end of 2008. Net debt rose to €6.6bn at the end of the quarter, from €5.9bn at the end of last year.
On sharply slower world markets, Fiat’s core autos division reported an 18 per cent drop in first-quarter revenues. The unit benefited from government scrapping incentives in countries including Brazil, Fiat’s biggest overseas market, and Germany, where it reported a 193 per cent spike in year-on-year revenue.
CNH, formerly a cash cow for Italy’s largest industrial group, was hurt by the sharp decline in demand for construction equipment, and for agricultural equipment in its home market, the US. Fiat said it was studying measures to streamline CNH and cut costs.
Iveco’s quarterly revenues were 49 per cent lower than a year ago.
Mr Marchionne was due to fly to Washington later on Thursday for meetings with President Barack Obama’s autos task force.
The US government has given Chrysler until the end of this month to agree a partnership agreement with Fiat, and negotiate cuts to its labour costs and $6.9bn commercial debt.
If the deals are not reached, Chrysler will not qualify for an additional $6bn of federal aid and is likely to face bankruptcy and liquidation.
Mr Marchionne said last week that he would be prepared to take an executive role at Chrysler if the partnership was cemented.
The global economic slump and sharp slowdown in cars sales has endangered Mr Marchionne’s five-year-old turnaround of Fiat, which saw its debt downgraded to “junk” status by Standard & Poor’s last month.
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Fiat in talks to buy GM Europe
By Daniel Schäfer in Frankfurt and John Reed in London
Published: April 23 2009 12:59 | Last updated: April 23 2009 17:15
Fiat (http://markets.ft.com/tearsheets/performance.asp?s=it:F) has expressed an interest in buying the European units of General Motors (http://markets.ft.com/tearsheets/performance.asp?s=us:GM), according to German government officials, as talks continue between the Italian carmaker and Chrysler, the privately-owned US carmaker.
Hendirk Hering, economy minister for the the German state of Rhineland-Palatinate, confirmed on Thursday that Fiat and Canadian car parts supplier Magna International (http://markets.ft.com/tearsheets/performance.asp?s=ca:MG.A)were among the interested investors for GM Europe, which includes the Opel and Vauxhall marques. A spokesman for the government of Hesse, where Opel’s headquarters are based, also confirmed this but cautioned that a decision was not imminent.
“There are a lot more interested investors than just Fiat and Magna,” he told the Financial Times.
A sale to Fiat would be strongly opposed by Opel’s powerful works council, which fears heavy job losses as overlaps between both carmakers are immense, as well as regional governments including Rhineland-Palatinate and Hesse.
Beside Fiat and Magna, several financial investors have also taken a look at the offer document for GM Europe.
Sergio Marchionne, Fiat chief executive, would not confirm or deny any interest in Opel, but said that his company would be a “willing player” in industry consolidation. He said that wrapping up a partnership with Chrysler by April 30 was the Italian carmaker’s primary objective.
“I have nothing to announce,” Mr Marchionne told analysts on a conference call when asked about his interest in GM’s European operations. “We have not had any direct conversations with Opel.”
Mr Marchionne said Fiat still aimed to bring its total volumes up to 5.5m-6m cars a year, compared with the 2m it produces now.
“The market conditions to do that are here, and Fiat is a willing player,” he said.
At the same time, Mr Marchionne said: “Chrysler is on the table, and Chrysler remains my first and foremost objective.”
Any investor in GM Europe would be asked to pay at least €500m ($652m), but the US carmaker would not realise any financial gain from this investment as the money would be injected directly into Opel and Vauxhall.
GM Europe has asked for up to €3.3bn in government guarentees to support such a sale. However, German government insiders said that any deal was still weeks away as there were still many questions about how Opel and Vauxhall could be split from GM.
A German task force made up of government officials and investment bankers from Lazard on Wednesday flew to Washington for further talks with the US government, people close to the situation said.
Earlier, Fiat denied reports it would invest directly into Chrysler or fund it in the future.
The Italian carmaker, which faces a US government-set deadline next week to conclude a partnership agreement with Chrysler, said final terms of the deal were still being negotiated with the Treasury and the carmaker’s other stakeholders.
Fiat, which agreed in principle in January to share technology, vehicles, and dealerships with Chrysler, said it still had no plans to invest any of its own cash in the partnership, which would see the Italian carmaker take an initial 20 per cent stake, to be increased in 5 per cent increments.
“The alliance [between Fiat and Chrysler] does not contemplate Fiat making an investment in Chrysler or committing to funding Chrysler in the future,” Fiat said.
The denial came as the Italian industrial group provided new details of its deteriorating finances.
The group fell to a net loss of €411m for the quarter, from a net profit of €427m a year ago. Fiat’s car division reported better-than-expected sales, but the group’s overall result was dragged down by sharply slower business at its Iveco trucks division and CNH, the construction and farm-equipment subsidiary.
Analysts had expected Fiat to lose about €70m in the first quarter, based on an average of their estimates.
Fiat said it still expected an improvement in most of its businesses over the course of the year, and that it would still report a net profit of more than €100m.
Analysts have warned of the potential cash-draining impact on Fiat of a partnership with Chrysler, while some of Chrysler’s creditors are pushing it to make a direct investment in the carmaker as the cost of taking a 20 per cent stake in the US group.
Fiat on Thursday said that its cash balance was €5.1bn at the end of the first quarter, up from €3.9bn at the end of 2008. Net debt rose to €6.6bn at the end of the quarter, from €5.9bn at the end of last year.
On sharply slower world markets, Fiat’s core autos division reported an 18 per cent drop in first-quarter revenues. The unit benefited from government scrapping incentives in countries including Brazil, Fiat’s biggest overseas market, and Germany, where it reported a 193 per cent spike in year-on-year revenue.
CNH, formerly a cash cow for Italy’s largest industrial group, was hurt by the sharp decline in demand for construction equipment, and for agricultural equipment in its home market, the US. Fiat said it was studying measures to streamline CNH and cut costs.
Iveco’s quarterly revenues were 49 per cent lower than a year ago.
Mr Marchionne was due to fly to Washington later on Thursday for meetings with President Barack Obama’s autos task force.
The US government has given Chrysler until the end of this month to agree a partnership agreement with Fiat, and negotiate cuts to its labour costs and $6.9bn commercial debt.
If the deals are not reached, Chrysler will not qualify for an additional $6bn of federal aid and is likely to face bankruptcy and liquidation.
Mr Marchionne said last week that he would be prepared to take an executive role at Chrysler if the partnership was cemented.
The global economic slump and sharp slowdown in cars sales has endangered Mr Marchionne’s five-year-old turnaround of Fiat, which saw its debt downgraded to “junk” status by Standard & Poor’s last month.
Copyright (http://www.ft.com/servicestools/help/copyright) The Financial Times Limited 2009
"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy (http://www.ft.com/servicestools/help/privacy) | Terms (http://www.ft.com/servicestools/help/terms)
© Copyright The Financial Times (http://www.ft.com/servicestools/help/copyright) Ltd 2009.