The size of an expected capital increase at Fiat will depend on the needs of a new turnaround plan being worked out at the moment, the industrial group’s new chief executive was quoted as saying on Tuesday, according to Reuters.
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In an interview with financial daily Il Sole 24 Ore, Giuseppe Morchio said Fiat’s new industrial plan was based on improving the quality of its products, a more competitive cost structure and being at the cutting edge of innovation, Reuters reported.
According to the news agency, when asked whether Fiat was now discussing how much money it needed rather than whether it should carry out a capital increase, Morchio said a run of asset sales had raised more than the market had expected but that the group may need more money.
“We need to define the industrial plan of action to understand how much money we need. We want to use the new cash for investments and innovation, not to cover operating losses,” Morchio was quoted as saying, Reuters said.
The news agency noted that Fiat has already begun a five billion-euro recapitalisation of its car arm Fiat Auto but is widely expected to call for new cash at group level. Its controlling Agnelli family has approved capital hikes at holdings that own Fiat so they can take part.
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By GlobalDataAccording to Reuters, last week, family head and Fiat chairman Umberto Agnelli said Fiat would unveil its new plan by late June and added it was likely the company would need new funds.
Last week, sources told Reuters Fiat was talking to its creditor banks about lengthening the terms of a three billion-euro loan they gave the Turin-based group last year and that the banks could put forward another one billion euros of credit.
According to Reuters, Morchio did not comment on such reports but said “we have a very good relationship with our banks… They helped us through difficult moments and are still encouraging us”.
The news agency noted that Morchio also said General Motors, which owns 20% of loss-making Fiat Auto, had still not decided whether to put forward its part of a five billion-euro recapitalisation of the car unit announced earlier this year.
“GM’s position is clear. We respect their desire not to subscribe to the capital increase just now but there are another 18 months for them to make a final decision,” Morchio was quoted as saying, Reuters said. Fiat has already contributed three billion euros.
Reuters said that Fiat has raised billions of euros in asset sales over the last year to focus on its core of cars, trucks and tractors. Morchio reportedly said the divestments were over and that components unit Magneti Marelli and tools arm Comau were no longer for sale.
According to Reuters, Morchio said new models should provide “some positive signs” at the end of the year but said 2003 had got off to a bad start with an “ugly” first quarter.
He also reiterated Fiat was also looking to save money by sharing more parts and costs with GM and would work harder on its often-criticised after-sales customer service and marketing, Reuters said.
According to the news agency, Morchio also added to the general impression that Fiat is no longer entertaining the idea of exercising a “put” option that allows it to force GM to buy the other 80% of Fiat Auto from early 2004 to 2009.
“In the next months, I would like to focus on the industrial cost savings (of the partnership) and not bang on about contractual elements. Talking about the put produces no value either for GM or for us,” he reportedly said, according to Reuters.
