(story to be published in tomorrow’s issue, March 14)
Fiat shares were suspended early yesterday as the company looked poised to announce a cross shareholding alliance with General Motors of the US, ending months of speculation about the future of Italy’s largest manufacturing group. The Turin group on Sunday refused to comment on the imminent alliance with the world’s largest car manufacturer, but bankers and people familiar with the Italian company said its board was expected to meet this week to approve a landmark deal. Leading Italian politicians expressed support for the proposed alliance at the weekend. Giuliano Amato, the treasury minister, said consolidation in the car industry was “inevitable”. Piero Fassino, the Trade minister, said a strategic alliance was necessary for Fiat. Fiat had been negotiating for months a strategic alliance with several leading car manufacturers and until recently DaimlerChrysler had appeared favourite. However, a DaimlerChrysler deal was expected to involve its acquisition of full control of Fiat Auto, the Italian group’s core car division that accounts for about half of its E48bn ($46.25bn) annual sales. Fiat would then have been expected to take a stake of about 12 per cent in DaimlerChrysler. By contrast, the GM deal appears to be structured as an industrial partnership. The Detroit company is expected to acquire initially a 20 per cent stake in Fiat Auto worth about $2.4bn. In return, Fiat would receive a 5 per cent stake in GM, making it one of the US group’s largest shareholders. People familiar with the talks said no money would change hands. The GM stake offered to Fiat is also valued at $2.4bn. Officials also stressed that the deal had not yet been signed, although the terms have been finalised. Goldman Sachs is understood to have advised Fiat, while GM has used Merrill Lynch. The two companies are understood to have agreed to form a joint venture involving car engines and components, joint investments in Europe – where General Motors is present through Opel and Vauxhall – and Fiat’s participation in GM’s new online business-to-business internet venture. The alliance marks an historic turning point in Italian industry and the end of an era that saw Fiat and its controlling Agnelli family symbolise post-war Italian family capitalism. General Motors and Fiat are understood to have been in talks for almost a year, although they only intensified in recent weeks, with the cross-shareholding strategy emerging. GM declined to comment. Rick Wagoner, GM chief operating officer, has made clear in recent weeks that the group was determined to strengthen its market presence in Europe and Latin America – where Fiat is strong. The prospective deal comes at a time of rapid change in Italian business with the waning of the old big business networks and established industrial dynasties. This change has been accelerated by the rapid development of a so-called new economy and a new generation of entrepreneurs. Tiscali, the Italian free internet pioneer, listed on the stock market barely five months ago, has already seen its market capitalisation overtake Fiat. The Agnelli family also lost out last year to Olivetti in the battle for control of Telecom Italia. Although Fiat had insisted for the past 12 months it could survive on its own, car industry analysts expected it would only be a matter of time before the Turin group was forced into an alliance. Reuters