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Fiat, Chrysler and General Motors to set up a large automotive group with more than $100 billion in annual sales

04 May 2009 10:04 (UTC +04:00)

Baku-APA-Economics. Italian car company Fiat, fresh from signing an alliance agreement with Chrysler, said Sunday that it was exploring the possibility of merging its auto business and interest in Chrysler with General Motors’ European operations to create a large automotive group with more than $100 billion in annual sales, Seattletimes reported.
GM declined to comment, but the struggling U.S. automaker has said it is seeking outside investors for part or all of Opel, the German carmaker that is the core of its European operations.
Sources familiar with the negotiations say GM would have a stake in the new company grouping Fiat, Chrysler and GME operations if a deal were concluded. With annual sales of roughly 6 million cars and trucks, the group would be one of the top three or four in the world.
Fiat Chief Executive Officer Sergio Marchionne is scheduled to meet top German officials in Berlin today to discuss the deal amid concerns that such a combination would lead to more job losses and plant closures in Europe.
Marchionne’s gambit to form a large automaker by picking up pieces of the beleaguered U.S. auto industry is fraught with risk. Most cross-border deals end badly, including a recent alliance between GM and Fiat that turned out to be very costly for GM.
But the magnitude of the downturn in the global auto market is pushing auto executives to consider deals that they might not have explored in the past.
"It’s a whole new era," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "What everyone is trying to do is find a structure that will work. A lot of pride is being swallowed."
Fiat’s Marchionne, a Canadian-Italian businessman with a direct, informal manner, has been candid that he does not see the Italian automaker surviving selling slightly more than 2 million Fiat, Lancia and Alfa Romeo cars a year. Marchionne has said he wants to build a group producing between 5 million and 6 million vehicles â€” a goal that these two deals would help him achieve.
Some labor leaders and politicians in Europe are concerned that GM and Fiat, which have a combined 21 car plants in Europe, would shift production to lower-cost regions, such as Latin America. Opel is seeking $4.4 billion in German aid.