FIAT’S PLAN to build a European car giant with Chrysler and GM’s German unit, Opel, began to hit obstacles yesterday as Berlin issued a string of conditions for any Opel buyer, and dissident Chrysler creditors said a sale to Fiat would be “patently illegal”.
The moves came as Sergio Marchionne, Fiat’s chief executive, met government and union officials in Berlin in the first round of his campaign to secure political backing by the end of this month for a car group with up to seven million in annual sales and combined revenues of €80 billion.
Frank-Walter Steinmeier, Germany’s vice-chancellor, said Opel’s future owners might have to base the company there – one of 14 criteria the foreign minister would use to evaluate any offer.
Fiat said yesterday that a decision on a future headquarters for the merged group would be “premature”, but added: “Opel is a German company, so it needs a headquarters in Germany.”
Alongside Fiat, up to six other suitors remain in the running for a stake in Opel and the rest of GM Europe. Interest has come from Canadian car parts group Magna International, sovereign wealth funds from Abu Dhabi and Singapore, and three private equity groups.
In the US, dissident Chrysler creditors asked a New York bankruptcy court to block the restructuring of the carmaker. The group of about 20 money managers claimed Chrysler’s proposal to creditors last week stripped them of their rights as senior lenders and ignored procedures in the bankruptcy code.
Canadian car parts group Magna and Gaz, the carmaker owned by Russian tycoon Oleg Deripaska, are believed to be still interested in Opel. The Abu Dhabi Investment Council and Government of Singapore Investment Corp have expressed initial interest, as have three unidentified private equity groups.
Mr Marchionne’s bold and very public bid to buy control of GM Europe and meld it with Fiat Auto and Chrysler has unsettled a low-profile sale process led by Commerzbank since April. GM asked the bidders to sign non-disclosure agreements, and Magna and the others are not commenting on their potential interest in Opel.
Given official antipathy toward financial “locusts” in Germany, the odds of a private equity bid winning political support are slim.
Elsewhere in Europe, Fiat wants to fold Saab, which GM is selling separately, into its proposed new car group. However, Fiat was not among the 10 or so companies to have completed due diligence.
While the Italian company is ready to allow GM to retain a 20 per cent stake in its European arm after merging it with Fiat, spinning it off in a public offering and holding onto about one-third of shares itself, GM is said to be interested in a stake closer to 40 per cent.
GM, which is not commenting in detail on the sale, wants to keep a significant stake so it can participate in the upside potential of a tie-up with Fiat or any investor.
Fiat’s proposed new carmaking group is willing to take on €4 billion of GM Europe’s pension liabilities, but the Fiat parent also wants the new concern to take on €3 billion of intercompany debt.
Fiat and GM will also have to iron out issues of overcapacity. Of nine GM Europe facilities outside Russia, plants in Antwerp, Belgium, and Bochum and Eisenach in Germany are seen as the most vulnerable to closure.
However, Mr Marchionne told German officials he would close no plants in the country, so cuts will have to come at GM’s engine plants or other European factories.
Mr Marchionne says he can reap synergies worth more than €1 billion annually by melding Fiat and Opel’s carmaking and powertrain operations in Europe.
Fiat is also believed to be interested in taking a stake in GM’s Latin American operations, which sold 1.3 million cars last year, although GM has publicly confirmed no plans to sell a stake in it.
GM in the US is making contingency plans around a likely “surgical” bankruptcy filing at the end of this month. – (Copyright The Financial Times Limited 2009)
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