Fiat Makes a Play for GM's Opel Division

By Editors on May 4, 2009 1:25 PM

Fiat has confirmed that it is in negotiations with General Motors to acquire most of its European operations, highlighted by its Opel brand. The Italian automaker's CEO, Sergio Marchionne, was given the green light by the company's board of directors to make the deal happen; an undertaking he hopes can be concluded as early as the end of this month. Marchionne has long contended that Fiat requires additional scale to remain viable in the 21st century autoscape. Beyond the leveraging potential that could be realized by the firm's already-pending linkup with Chrysler, he sees huge financial synergies -- on the order of $1 billion -- from an Opel takeover than would allow a consolidation of their collective A, B, C and D segment vehicle platforms.

Marchionne met with officials of the German government in Berlin today to seek help in securing some $4.3 billion in additional funding that Opel says it needs to continue on as a going concern. However, the national interest here lies primarily in finding a suitable partner for the troubled GM nameplate, not necessarily in playing "let's make a deal" with Fiat. Given that overriding reality, the level of monetary or political assistance the German government chooses to offer will be directly linked to Fiat's ability to present a viable overall financial plan. A key part of that will involve its commitment to assure that that existing Opel plants remain open and that the takeover will have minimal impact on the jobs of more than 100,000 European autoworkers, not only in Germany, but in Italy and other countries where Fiat and Opel vehicles are currently being produced.

If successful, the Fiat/Chrysler/Opel linkup would be expected to raise Fiat's world market volume from 2.2 million to 5.5 million units annually and generate operating revenues in excess of $105 billion. The board has indicated it's now evaluating several possibilities; including creating a new publicly traded corporate entity that would combine Fiat Group Automobiles with the Opel organization. While filled with promise, the road ahead is not likely to be a smooth one. Beyond opposition already being voice by both Italian and German autoworkers, Fiat faces an additional challenge from Canada's Magna International Corporation, which also has expressed interest in acquiring the Opel division from General Motors.