ITALY: Lull in boardroom battle gives Fiat creditors time to regroup - report
Reuters today reported that a truce in the boardroom battle for control of Fiat should give the ailing industrial giant time to press on with asset sales as it tries to avoid a debt downgrade, but its turnaround strategy remains in question.
According to Reuters, Fiat's creditor banks appeared to have won time and breathing space in a tussle with rival Mediobanca, which is trying to muscle in at the Italian icon.
A Reuters report on Wednesday said that Mediobanco had been discussing with the Agnelli family, which controls Fiat, a plan to spin off Alfa Romeo from Fiat Auto and combine the sporty marque with Ferrari-Maserati in a new luxury car group. Sources have told Reuters all or part of this new luxury car group might then be sold to Volkswagen.
On Friday, Reuters said that Paolo Fresco would be confirmed to continue as Fiat's chairman at a board meeting later in the day.
Reuters said Fresco, who engineered the Fiat alliance with General Motors, had been expected to quit just days after chief executive Gabriele Galateri stepped down as men close to Mediobanca and the Agnelli family were tipped to take their place.
"Creditors were furious at Mediobanca trying to wield power so they insisted Fresco stay. But it's just a temporary solution which means we'll go through the uncertainty all over again in a few months," a car industry analyst, who declined to be named, told Reuters.
Sources told Reuters that Fresco would remain chairman until a shareholders' meeting in April with Fiat veteran Alessandro Barberis stepping up to be CEO as well as holding his current post of director general.
A Bloomberg News report carried by the Detroit News said Barberis joined Fiat as an assembly line worker in 1964, became chairman of scooter maker Piaggio in 1997 and assumed his current position in June. Barberis this month brokered an agreement with the government that allows Fiat to eliminate jobs as it tries to return to profit and revive its slumping shares, that report added.
Reuters on Friday said Fresco's reprieve now gives Fiat time to settle the sale of customer financing arm Fidis to now-appeased creditors, chopping about six billion euros off its 32.8 billion euro gross debt and working towards the first goals of its rescue plan, including capacity cutbacks and thousands of layoffs.
But, Reuters added, the peace accord is a fragile one for Fresco and the creditor banks, who will still face pressure to keep Fiat from falling into GM's hands in 2004 [under the so-called 'put option' negotiated when GM bought a 20% slice of Fiat] and to keep car production jobs in Italy.
"The whole arrangement is seen as a trial period until a shareholders meeting in April or May. Then the top management line-up and industrial plan will be evaluated," said Insinger bank fund manager Patrizio Pazzaglia told Reuters.