Fiat May Rework Plan with GM

After meeting with its chief creditors, Fiat SpA finally confirms it may renounce the put option it has with General Motors Corp.

The company says the option remains valid but it would immediately disclose any concrete” change to it. This is the first " />

Issue: Mar 2003


International Trends



by Andrea Wielgat


Fiat May Rework Plan with GM

After meeting with its chief creditors, Fiat SpA finally confirms it may renounce the put option it has with General Motors Corp.

The company says the option remains valid but it would immediately disclose any concrete” change to it. This is the first time the company has publicly acknowledged it was considering changing the agreement. GM owns 20 percent of Fiat Auto and is under obligation to buy the remaining 80 percent — if Fiat wants to sell and forces GM to buy — from 2004 until 2009.

Sources say that if Fiat throws out the put, GM will inject much needed money into Fiat Auto. One option has GM paying $2 billion for an additional 10 to 20 percent stake in Fiat Auto. That would also relieve GM of the put. If the put option is kept intact Fiat must raise the money on its own, most likely with a capital increase of up to $3 billion.

Fiat also is looking into selling several of its profitable units including insurance company Toro SpA or Fiat Avio, the company’s avionics division. The two companies are said to be worth about $3 billion.

That is the same amount that Fiat borrowed last year. Under that agreement the creditors can force Fiat to sell assets if it does not cut its debt to the agreed levels while keeping an investment grade rating.

The company has cut its net debt levels by selling off its $1.2 billion stake in GM but its gross debt is expected to remain at $25 billion due to the company’s inability to deconsolidate the finances of Fidis, the company’s consumer finance arm.

Reports say Fiat officials will meet with GM executives on the put option in the immediate future.

Toyota Debuts New Harrier, Future Lexus

Toyota Motor Corp. recently unveiled its new Harrier sport/utility vehicle, which will make its way to the U.S. as the Lexus RX330. The company expects to sell about 2,500 Harriers a month in its local market with sales reaching an expected 9,000 a month in the U.S., when it goes on sale this spring. The vehicle will be built at Toyota’s plant in Kyushu, in southern Japan.

Initially the vehicle will be exported from Japan. Later the U.S. version will be the company’s first Lexus built outside of Japan.

Canadian production begins this fall with output eventually hitting 5,000 units per month. It is expected to be the only Lexus vehicle built outside of Japan. Toyota has said it has no plans to add any other vehicles to production outside its native country.

Pininfarina sales fall
Pininfarina SpA says its 2002 results saw a 28.4 percent drop in sales from $742 million $531 million. The Italian design house and car manufacturer said its earning before interest and tax were $21 million. The company expects better results for 2003 — along the lines of 30 percent — thanks to a new contract with Volvo Car Corp. and increase business to its engineering division.

Chile, South Korea sign agreement
More Korean cars may soon be heading to Chile. Governments of South Korea and Chile signed a free-trade agreement that exempts passenger cars from Chilean import tariffs. The talks started in 1999 and ended in October with an agreement signed in late February in Seoul. South Korea exported $409 million worth of goods to Chile last year with a majority being vehicles and domestic appliances.

China production up in January
Car production in China is up 1.2 times to 126,800 units during January setting a new monthly record. Shanghai Automotive Industry Corp. built the most vehicles at 44,400 units. According to the official government statistical agency, this is the first time a company built more than 40,000 units in a month and is the largest monthly output by a single company.

Car sales in China
2002  = 1.1 million
2003  = 1.4 million to 1.5 million expected



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