GM To Swap Latin American Ops For Fiat Stake?
GM wants to dump Opel on Fiat, but Fiat has its eye on GM’s successful Latin American division. GM sees a chance to hop on Fiat’s runaway train and is considering giving the operations to Fiat for a stake in the Marchionne empire. Two anonymous sources tell The New York Times that Fiat’s CEO “has indicated a willingness to give up less than 10 percent of Fiat to General Motors.” GM is said to be asking for 30 percent. How awkward.
Confirmation that Sergio Marchionne will be CEO of both Fiat and Chrysler has analysts questioning whether a third company might be a bit excessive. “A person has to sleep,” observes one Credit Suisse wonk. The implicit point seems to be that Fiat’s “supersize me” campaign is the personal project of one man and his unexplained fascination with attaining 5m annual global sales. And why might GM desperately bid for a tiny stake in a firm it ran screaming (and $2 billion lighter) from just a few years ago? “It lets Fiat do the hard work of scaling up Opel, while giving something valuable to GM in the long run,” explains Philippe Houchois of UBS. Yes, but it also rids GM of one of its few sources of short-term cashflow. But hey, who needs those when you’ve got the American taxpayer on the line? Am I right?
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And now GM loses 6 billion in the first quarter. This is craziness.
Someone please wake me up when this is all over.
Ingvar: I think you're close. Instead GM sells LA (and whatever else FIAT wants), and in 3-5 years buys it back for pennies when FIAT is choking on their acquisitions and close to BK. It happened with Japan buying up lots of US real estate in the late 80s/early 90s IIRC. Bonus: FIAT gets tagged with all the blame for un-employing thousands trying to make the mess profitable...not GM.
@Autobraz From what I've heard, they want from GM the production capacity. Not the cars. GM's small cars would be phased out, and Fiat would milk the larger cars for as long as possible. Not to mention getting the subsidies GM got for building the factory in Rio Grande do Sul. In terms of engines you might also see GM's 1.4 live on.