General Motors is considering exchanging its Latin American and European operations for a stake in Fiat, a US newspaper said on Thursday.
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The news came four years after GM – which today announced its seventh straight quarterly loss: $6bn – paid $2bn to extricate itself from a partnership with Fiat that produced engines and vehicle platforms still in use on current models from both automakers.
The New York Times said GM was eager to cede control of its loss-making Opel unit while Fiat had expressed interest in GM’s other European operations as well as its historically profitable Latin American business, though the possible terms of such a deal have not been discussed publicly.
GM Europe booked an EBIT loss of $1.2bn in the first quarter of 2009 compared with a $200m profit last year while the Latin American unit booked an EBIT profit of $42m, albeit down from $500m in Q1 2008.
GM feels it has a bargaining chip with its Latin American unit and is negotiating with Fiat over what it might get in return, the NYT said. Citing “two people close to the negotiations”, the paper said the companies were still far apart.
Fiat CEO Sergio Marchionne has indicated willingness to give up under 10% of Fiat to GM while the US automaker’s executives are holding out for at least 30% of the Fiat Auto Group, the sources told the newspaper.
Both automakers declined to comment.
UBS analyst Philippe Houchois told the New York Times that GM’s Latin American operations could prove profitable for Fiat well before the Chrysler deal begins yielding dividends and it made sense for GM to negotiate a stake in Fiat, despite their tangled history.
“It lets Fiat do the hard work of scaling up Opel, while giving something valuable to GM in the long run,” Houchois told the paper.
The NYT said Fiat and GM clashed frequently during their five-year partnership, begun in 2000. Fiat engineers reportedly said GM was too cautious and unwilling to embrace new technology that would have created cleaner, more fuel-efficient engines while Opel engineers became convinced that Fiat didn’t share its focus on detail or quality standards.
