Fiat aims for GM Europe merger
Italian car firm outlines plans to create world's second-biggest car manufacturer.
Last Modified: 04 May 2009 18:01
An Opel engine and parts factory could be hit
by the proposed merger [EPA]  

The head of Italian car firm Fiat has outlined plans to create Europe's biggest car maker by taking over General Motors' European operations, including the British Vauxhall and German Opel brands.

Sergio Marchionne met German ministers to tout what he called a "marriage made in heaven" on Monday, but the deal would require billions of dollars in financial support from governments.

Marchionne's plan includes merging the companies with Chrysler, the bankrupt US car maker, with which he sealed a partnership deal last week.

If realised, the combined group would be the world's second-biggest car maker with sales of about six to seven million vehicles a year and $107bn in revenues.

Karl-Theodor zu Guttenberg, Germany's economy minister, one of the ministers to meet Marchionne in Berlin, said Fiat wanted to take over GM's Opel unit without running up debt and would preserve its three main German assembly plants if successful.

Klaus Franz, Opel's labour leader, reacted cautiously.

"We will not be hostile to anyone but we will undertake a very careful risk analysis," he said.

'Social cost'

Opel employs about 25,000 people in Germany and the government is keen to save jobs at the Opel unit ahead of a September election.

The company also has plants in Spain, Belgium and Britain.

Analysts said planned job cuts could be a stumbling block to a deal.

"The big hurdle we can see is social cost. I'm not sure if the Italian or German governments have the appetite for the job losses a merger would entail," Michael Tyndall, an analyst at Nomura International, said.

While Opel's three assembly plants would be safe under Marchionne's plan, an engines and parts factory in Kaiserslautern, in western Germany, may be hit, Guttenberg said.

State guarantees

The minister said he would look at the details of the Fiat plan but was also considering other options.

He said that Fiat was not planning on taking on new debt but that it would require about $6bn to $9bn in bridge-financing and was seeking state guarantees from around Europe.

Previously, Opel had said it required $4.37bn in state guarantees.

Angela Merkel, Germany's chancellor, has said she is open to guarantees but has cautioned that a decision will depend on the feasibility of Opel's plans and on its finding a partner.

There are other potential investors interested in Opel, including Magna, an Austrian-Canadian car parts maker.

Fiat's shares were up 7.3 per cent in Milan in afternoon trading.

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