Fiat’s tie-up with GM has been the subject of considerable speculation over the last few years as the troubled Italian manufacturer attempts to get back into the black after recording significant losses in recent years. With GM having its own problems in Europe, it may only be a matter of time before the two sides agree to go their separate ways.

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Several vehicle manufacturers have looked for relationships with each other in recent years in an attempt to share costs. In the case of Fiat and GM, their relationship extends to a 10% equity stake that the latter holds in the Italian player, plus their tie-up in powertrain development and component purchasing. The relationship has come under pressure in recent months due to the ‘put option’, which, if exercised by Fiat, will mean that GM will buy the 90% of Fiat that it does not already own.


Despite this ‘put option’, which becomes exercisable in January 2005, reports in the media suggest that Fiat is looking for other partners to develop its vehicles, with PSA Peugeot Citroen and Honda being cited as the main targets.


However, reading between the lines, the tensions that already exist between Fiat and GM over the put option have been exacerbated by the over-capacity that is prevalent in the auto industry at present. This has put pressure on the joint venture projects that exist between the two. In addition to this, it has also been hinted that Fiat’s quest to return to profitability is being hampered by its tie-up with GM.


Both sides are working in particularly difficult conditions; Fiat’s cost-cutting drive has caused considerable unrest among its staff, with further industrial action planned for December. GM meanwhile is scarcely better off – it is currently the sick man of Europe’s auto industry, and the firm is planning to axe thousands of jobs across the continent in a bid to stem widening losses. Taken in this context, it would therefore be little surprise if the relationship between Fiat and GM were quietly dissolved in the months ahead.

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At the moment Fiat’s strenuous denial of the speculation suggests an immediate decision on the future of the tie-up is unlikely. Yet looking longer term it might make sense for the two manufacturers to go their separate ways: after all, it is not as if they do not have plenty of issues of their own to confront.


SOURCE: DATAMONITOR COMMENTWIRE (c) 2004 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.