Fiat SpA said on Monday the end of its mediation period with General Motors had been pushed back until February 1, but that it will have the option to compel GM to buy its troubled auto division beginning the following day, an Associated Press (AP) report said.
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The announcement came on the day mediation over the “put option” – through which Fiat has the right to sell its car business to GM – was due to end, the news agency noted.
Fiat reportedly said it moved the date “to wait for the conclusion of the process of mediation” – it added the put option is “an important instrument for Fiat, and is valid and can be exercised according to the terms agreed.”
According to AP, Fiat said it would be able to exercise the option beginning February 2 until July 24, 2010. The option is part of a 2000 agreement that says the Italian company can legally compel the US-based car-making giant to acquire the 90% it does not already own of Fiat Auto.
In a statement, Fiat reportedly rejected claims by GM that the Italian company may have breached the agreement through actions including a recapitalisation of Fiat Auto Holding BV and the sale of a 51% stake in Fiat Auto’s consumer finance division.
The Associated Press said that taking Fiat’s auto unit under its wing could be a problem for GM, which is already grappling with woes at its Opel unit in Europe. GM announced plans last year to cut as many as 10,000 jobs at Opel in an attempt to return it to profitability.
The mediation process, in which Fiat chief executive Sergio Marchionne and GM chairman and chief executive Rick Wagoner negotiate between themselves, began on December 16.
RASbank analyst Gabriele Gambarova told the Associated Press the decision to extend the mediation period “can be seen as a sign of relaxation suggesting that an agreement is still possible.”
“Now we know for certain that there is a dialogue,” he reportedly said, adding that a cash settlement from GM to annul the put option is the most reasonable solution.
According to AP, Fiat said it did not expect relations with GM to impinge on its financial targets for the next three years – Fiat is aiming to post a group net profit of more than €500 million ($US654 million) by 2006, and to increase that to above €1.4 billion ($1.8 billion) in 2007.
The Associated Press noted that Marchionne said in October that new models were not boosting revenues as much as hoped, highlighting a fiercely competitive European car market.
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