GM has downplayed speculation that it is interested in a formal merger with Fiat Auto. In an interview with the Financial Times, GM chief executive Rick Wagoner said that the two companies were concentrating on their alliance and had 'not discussed' the possibility of Fiat exercising its put option to sell 80% of Fiat Auto to GM after 2004.

GM currently has a 20% stake in Fiat Auto and under the terms of the GM-Fiat alliance, Fiat has an option to sell the remaining 80% to GM from 2004. The alliance agreement between the two companies would have to be fully re-negotiated to bring that date forward.

Wagoner also told the newspaper that GM is mid-way through restructuring its own loss-making European operations with the aim of reducing capacity by 25% and that both companies should restructure operations in the context of their alliance agreement.

However, Wagoner did confirm that GMAC, GM's automotive financing arm, is considering a tie-up and possible equity stake in Fidis, the financial services arm of Fiat.

Observers note that GM will be stretched by its recent takeover of Daewoo Motor assets and associated integration issues. Another possible problem for GM with Fiat Auto is its 'unbreakable' contracts with suppliers like Magneti-Marelli and their cost/productivity implications.

It was reported at the end of last month that GM has a secret team looking into all Fiat Auto acquisition issues and that the team's final report will determine whether or not takeover talks proceed.

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