Fiat Future Uncertain
Giovanni Agnelliís death leaves many questions.
Fiat Autoís future continues to look questionable following the death of family patriarch and Fiat SpA honorary chairman, Giovanni Agnelli.
Agnelli, 81, was a staunch supporter of the companyís loss-making auto unit and often resisted pressure to sell the car business of the group. Following his death, experts expect major changes at the ailing auto company, which includes the Fiat, Alfa Romeo and Lancia brands.
One of the possible scenarios for the company includes General Motors, which owns 20 percent of Fiat Auto and has an engine and purchasing joint venture with the company, buying the 80 percent of the company it does not own. This Ďput optioní was a condition of the 2000 joint venture/share stake deal and comes into play next year.
But GM has not shown much interest in buying Fiat Auto. The company is currently undergoing its own European restructuring and is busy introducing an onslaught of new product aimed at increasing the companyís marketshare in the very competitive Western European market.
A second scenario sees GM increasing its stake to 40 percent and injecting about $1 billion into the company. This would reportedly absolve or at least delay GMís obligation to buy all of Fiat Auto. This would also be a more immediate solution and could happen in the near future vs. the put optionís 2004-2009 timeline.
A third scenario sees Fiat selling off its Fiat, Lancia and Alfa Romeo brands to a third party. Giovanni Agnelli vehemently opposed this option. But his successor and brother Umberto Agnelli has voiced support for this proposition saying it would inject much-needed cash into the parent company. Last year it entered a restructuring plan that had four banks grant it $3.1 billion in loans so the company could begin to deal with its $6.1 billion in debt.
An additional option involves Italian financiers rescuing Fiat. Several have detailed plans that would allow them to invest into the company and give the financier an equity stake and management role.
Analysts say Umberto is leaning toward selling the auto unit to GM. But this solution would most likely result in the closure of several Italian plants and the loss of thousands of jobs. Two things Italian government and labor leaders are vehemently opposed to.Agnelli, 81, was a staunch supporter of the companyís loss-making auto unit and often resisted pressure to sell the car business of the group.