TURIN, Italy (AP) — General Motors Corp., the world's largest automaker, is taking a 20 percent stake in Italy's Fiat SPA in exchange for $2.4 billion in stock — equivalent to 5.1 percent of GM.
The partnership announced today was expected to open up international markets for both automakers.
The deal covers Fiat's Alfa Romeo and Lancia brands. It does not include Fiat's other companies, Ferrari and Maserati. The deal will include joint ventures in purchasing, engine development and auto financing.
As part of the agreement, the Detroit-based GM has the first right to bid on the rest of Fiat Auto if Fiat decides to sell in the future.
The deal is subject to approval by U.S. and European Union regulators.
The alliance has already received the blessing of the country's major union confederation, CGIL.
TURIN (Reuters) — Italy's Fiat and the world's top carmaker General Motors on Monday unveiled an alliance backed with cross-shareholdings in a bid to keep abreast of the wave of global consolidation.
The deal, elbowing aside a bid for Italy's industrial dynasty from DaimlerChrysler, calls for joint ventures in engines and components and especially targets the markets where both carmakers operate, Europe and Latin America. The two carmakers expect to save up to $2 billion a year from the alliance.
"Automaking today is truly a global affair," GM Chairman and CEO John Smith told a news conference at the historic Turin headAlls where Fiat last year celebrated its centenary.
"The challenges are great but the opportunities are almost timeless and limitless," Smith said.
Fiat Chairman Paolo Fresco told the news conference, beamed live to GM's headAlls in Detroit, the deal would enable Fiat's recently loss-making car division to compete better.
"We are offering our shareholders further confirmation of the fact we want to grow and keep our fate, our destiny, under control," Fresco said. Industry sources said the deal hammered out on Sunday night followed what was effectively an "auction," carried out in secret over several months and pitting GM against DaimlerChrysler and BMW, among others.
DaimlerChrysler had offered to buy Fiat Auto outright in shares and cash. But the Agnelli family, headed by patriarch Gianni who turned 79 on Sunday, had battled to maintain control of one of Europe's most prominent family-held empires.
The deal will see Fiat's smart Alfa Romeo saloon brand reintroduced to the United States, where the Italian group has been out of the picture for several years.
General Motors and Fiat announced a strategic cooperation deal Monday that some analysts called a prelude to a GM takeover of the Italian industrial giant’s troubled automotive operation. Fiat officials stressed that they expected their business to remain independent.
It also will give Fiat the option to sell the remaining 80 percent of its car division to GM in three and a half years.
Fiat now sells only its Ferrari sports cars in the United States, a market it effectively vacated in 1995, when it sold its last Alfa Romeo models there.
Fiat executives said the companies expected that the next generation of GM and Fiat small cars would share a single platform by about the middle of the decade. Fiat expects to show an Alfa Romeo sports model at the Detroit auto show in 2001 and begin to sell it through GM dealers thereafter.
(quoting Fiat’s Chairman, Paolo Fresco:)
"The chairman also held out the possibility that the deal could generate extra synergies, should the cost savings allow Fiat to improve the final product, thus raising sales volumes. According to the deal, the synergies are to accrue from the upstream collaboration, although Fiat will gain a bit of a boost from the return of the Alfa Romeo model to the U.S. market after five years of absence."
RAPALLO, Italy — Fiat Auto managing director Roberto Testore said his company’s new alliance with GM could lead to the reintroduction of the Alfa Romeo Spider in the United States by 2003.
It would be followed one year later by the replacement for the 156 intermediate sedan.
"We are close to freezing the new Alfa Spider design and so we are still in time to federalize it during its development," Testore said. "The Spider is also a perfect Alfa for North America," he added.
Fiat has not decided yet which GM sale channel it will use for returning Alfa Romeo to North America. "The decision to return to the U.S.A. hasn’t been made yet," said Fiat Group managing director Paolo Cantarella, "so it is premature to identify a sale channel."
After GM Deal, Wherefore Art Thou, Alfa Romeo?
The partnership announced last week between General Motors and Fiat opens a window for the return of Alfa Romeo to the United States. Until it withdrew in 1995, the Italian sports car maker was best known for two-seat convertibles like the Duetto that Dustin Hoffman drove in "The Graduate."
In Europe, Alfa Romeo, which is part of Fiat, still sells a sporty two-seat Spider convertible, as well as other models. Its 156, a successful small sport sedan, was voted Europe’s 1998 Car of the Year by auto journalists.
This month, at the Geneva auto show, the company introduced its 156 Sportwagon, which goes on sale in Italy this month.
Paolo Vannini, a Fiat spokesman in New York, said the Spider could come in 2003. The 156 does not meet American standards, but the next-generation car could be designed with the United States in mind.
But distributing Alfa Romeos "isn’t even on the radar screen," a spokesman for GM, Tony Cervone, said.
