Financial details of Fiat’s plan to create a giant automaker operating in Europe, America and Africa emerged at the weekend.
The Italian firm aims to merge its Fiat Auto car business with General Motors’ European brands, Opel, Vauxhall and Saab, as well as its South American and South African operations, according to a copy of the ‘Project Phoenix’ proposal obtained by Reuters.
While the plan would help save a total of around EUR1.4bn a year after 2015, and create EUR5.6b of net cash flow between 2009 and 2015, the merger likely would come at the price of a few plant closures and downsizing of some factories, Reuters said, adding that Fiat estimated restructuring costs of up to EUR500m (US$666.1m) to cut the European workforce.
Late last week, German newspaper Handelsblatt, citing the same Fiat proposal, said planned factory shutdowns included an Opel powertrain plant in Kaiserslautern in western Germany, the Vauxhall/Opel/Renault van JV plant in Luton in Britain, and a factory in Graz in Austria, plus two Fiat plants in Italy. Plants to have capacity reduced were Zaragoza, Spain, a Saab facility in Sweden and the Opel plant in Belgium.
The ‘Phonenix’ proposal was presented to the German government a week ago (4 May) and Fiat subsequently denied media reports it planned to axe 18,000 jobs – daily Frankfurter Allgemeine Zeitung had cited a ‘sensitive internal document’ titled ‘Project Football’ dated 3 April.
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By GlobalDataAccording to Reuters at the weekend, Fiat said in the Project Phonenix proposal it aimed to “ultimately remain as one of the five or six surviving entities in the global automotive market place”.
Fiat appears to be trying to survive the global economic downturn by building up in size rather than selling assets – if it manages to reach a deal with GM, it would create the world’s second largest automaker after Toyota.
Reuters noted that GM Europe has said it needs to cut costs $1.2bn to return Opel to profit by 2011 and has also said it needs EUR3.3bn in state aid from European governments to avert job cuts and site closures.
There have been unconfirmed reports about EUR600m of that would be used for Vauxhall operations here in the UK.
Fiat CEO Sergio Marchionne has said the proposed Fiat-Opel deal depends on the willingness of European governments, chiefly Germany’s, to provide EUR5-7bn in loan guarantees to cover GM Europe’s unfunded pension liabilities and debts, Reuters added.
Meanwhile, his move has met opposition both in Germany and in Italy – German labour unions favour a bid by Magna International, which has expressed interest in Opel.
A source close to the situation told Reuters that GM could, as part of the deal, take a stake in the new entity created by the merger. The size of GM’s stake would depend on which parts of its business would end up in the new company.
And the New York Times said on its website that GM wanted at least 30% but Fiat was only willing to give up less than 10%.
Fiat vice chairman John Elkann told Reuters at an event in Switzerland that the aim of Fiat’s plans was to create a strong carmaker with long-term prospects.
“That’s today what really matters,” Elkann said.
Fiat has also mentioned the possibility of spinning off the combined group and listing it on a stock exchange.