GM/FIAT put option

GianniB · #1 (**permalink**) 12-07-2004, 04:25 PM

There's an article in the Financial Times today saying that FIAT is going to take GM to court next week over the put option they have to force GM to buy FIAT's automaking division. GM argues that it is no longer valid given the restructuring FIAT has done since the deal was done a couple of years ago.

http://news.ft.com/cms/s/96f7fa04-47...00e2511c8.html

Cheers,

dretceterini · #2 (**permalink**) 12-07-2004, 05:06 PM

If Fiat looses this case, I think they are doomed. Who would want to buy a business only worth about 2 billion Euros that has already has 4 billion Euros worth of debt?

GianniB · #3 (**permalink**) 12-08-2004, 09:50 AM

There's a scenario in a Business Week article that has GM giving FIAT cash to go away and then the Italian Government steps in. Talk about full circle for Alfa

http://www.businessweek.com/magazine...2079_mz054.htm

Cheers,

dretceterini · #4 (**permalink**) 12-08-2004, 10:18 AM

There is no logical reason for GM to give Fiat money and just prolong what has been going on for the last 10 years or so. For all intents and purposes, Fiat is dead, and has been for some time.

Quite frankly, I don't think can be saved. If GM is forced to excercise their put option, then Fiat becomes just another GM division.

I think ultiamtely what will happen is that the Italian government will have to bail out Fiat, in the same way the US government bailed out Chrysler. Italy can not afford that many more unemployed.

**italcarguy** · #5 (**permalink**) 12-08-2004, 10:25 AM

I wish Ford would have bought in instead of GM. I bet we would have had new cars here a couple years ago. Maybe Ford will step in and take over? Let's hope so.

dretceterini · #6 (**permalink**) 12-08-2004, 10:46 AM

Anthony:

There is no reason in the world for anyone to buy Fiat Auto. It would be like buying an Alfa worth $2,000 and having to pay $6,000 for it, only we are talking about billions and not mearly thousands of dollars.

Alfa hasn't really been Alfa for a number of years, and it is getting quickly to the point it is no longer even Fiat. If it was Ford instead of GM, nothing would change except it would be an Alfa badged Ford instead on an Alfa badged GM car.

**italcarguy** · #7 (**permalink**) 12-08-2004, 10:51 AM

I would be the first to love to see Alfa on it's own but IF it was between Ford and GM, I'd go with Ford.

turbolarespider · #8 (**permalink**) 12-08-2004, 12:15 PM

Anthony- we don't have the cash to even possibly properly manage Fiat out of this garbage bag they are in. It's hard enough to run Jaguar- talk about a money pit!

But Fiat Auto would be an order of magnitude worse.

Now, if we had gotten Alfa back in the 80's... boy, how things would be different. More than likely, Jaguar would NOT be part of Ford, although AML still might. One could have seen some of Cosworth go into Alfa racing... or not.... I might have gone to Italy more than England.

But now, Fiat is a big hole just waiting for trouble. And I belive that they are just manipulating the government for a mis-guided, (and probably mis-used) bail out.

Bear in mind, we've not made money for 3 years, and our stock (thanks to Jac the knife) is at 1/3 of it's best. At least that is better than 1/6..... Perhaps Fiat should hire Jac!!!

Eric

GianniB · #9 (**permalink**) 12-08-2004, 02:17 PM

Quote:

There is no logical reason for GM to give Fiat money

wolfchen75 · #10 (**permalink**) 12-08-2004, 02:34 PM

what is really too bad is that Enzo Ferrari didn't sell out to FORD in the 1960's, That
would ahve shook up the italian auto industry. Next best would have been if Maserati
had gone to Nissan not Citroen in the 1970's.

**Timo** · #11 (**permalink**) 12-09-2004, 08:28 PM

...and to further enforce the idea that there is no valid reason for GM to "give" FIAT any money. GM like any other rational business will put their $$$ where many more $$$ will be made to add to the bottom line i.e. increasing the value of the stock price for it's shareholders.

To that end guess which is one of the biggest money making business units GM currently owns?

The Dietech Home Loan division. This unit obviously has nothing to do with making and selling cars.

That's right all those silly commercials that we see on Speed Channel and elsewhere are ultimately funded by the parent company GM. Not to mention the Nascar sponsership with the big Dietech graphics. GM will put ther money where much more will be made.

Finacial services/consumer lending is making huge dollars for GM (and other large multinational corporations like GE) while they are barely, if at all, making any money producing and selling cars. Other than the Italian Gov't trying to save jobs, national pride/heritage and all the rest...I can't imagine why anyone would throw money FIAT's way.

Hopefully someting positive will happen for FIAT (Alfa Romeo & Lancia) Otherwise there is a danger that they will completely cease to exist altogther. That is no more brands/badges in any way, shape or form.

GianniB · #12 (**permalink**) 12-10-2004, 09:36 AM

It's not "giving" them money to be gracious, it is paying them off and getting an agreement that the put option to force GM to take over FIAT Auto is no longer valid. IMHO if the put is ruled still in effect, it is a better option for GM to buy its way out of the put rather than take FIAT Auto and try to integrate it into GM's very sick European Operations. Just today I read GM reached agreement with the European Labor Unions to cut 12,000 from Europe. GM's European operations have LOST $3 BILLION over the last four years. Thru the 3rd quarter they've lost $758 million this year vs. $399 million for the same period in 2003. No way GM wants to add FIAT to this mess...

Cheers,