GM is planning to write-off most of its stake in Fiat Auto. As Fiat continues to slide, with job cuts and strikes looming, General Motors gears up for negotiations. With Fiat holding a write-to-buy clause for 2004, the question for GM is what to do with the Italian carmaker.
General Motors, the world’s largest carmaker, is planning to write-off most of the company’s 20% stake in Fiat Auto. The move comes as Fiat faces fresh difficulties, with impending job cuts and staff strikes.
Three major Italian unions have called for a four-hour strike in protest at the job cuts, which will total 8,100 and represent 20% of the total workforce. The strikes have gone some way to creating the recent fall in the firm’s share price, which declined by around 16% in the space of five days.
When GM took its stake in Fiat, it was on the condition that Fiat could enforce its sale to GM in 2004. As a result, the American firm is now preparing to enter into negotiations with its Italian counterpart, because it is looking increasingly likely that Fiat will look to GM to rescue it from possible collapse.
GM’s write-off of its stake is, according to Fiat chairman Paolo Fresco, the first step in the bargaining. “I don’t think they will give us a high valuation as that would hurt their bargaining position and give me strength to negotiate”, Mr Fresco said.
The question now is what GM plans to do with Fiat. The two firms are discussing many different possibilities, including technology-sharing. However, the most radical move would be to integrate Fiat into Opel, GM’s European arm.
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