2nd UPDATE:Fiat Not Planning Cash Offer For GM Europe-Source
May 18 2009 - 6:22AM
Dow Jones News
Fiat SpA (F.MI) Chief Executive Sergio Marchionne is meeting
with advisors and German government officials up until Wednesday,
when he will submit a non-cash offer for General Motors's (GM)
German unit Adam Opel AG, a person familiar with the situation said
Monday.
Marchionne said Friday he will make the offer by May 20, the
German government's deadline. Marchionne wants to buy GM's European
operations, including Opel, as part of his bold plan to tap
government financing to create one of the world's largest
automakers.
"The plan that Fiat has been drafting with its advisors doesn't
include plant closures in the European countries where the
U.S.-based carmaker is currently operating," the person said,
adding Fiat isn't going to offer any cash to General Motors for its
European operations. Fiat wasn't immediately reachable for a
comment.
GM's European operations are almost out of cash, and the company
is willing to sell a majority stake in Opel as part of an effort to
win financial aid from the German and European governments, GM's
Chief Operating Officer Frederik Henderson said in March at the
Geneva car show.
Unlike GM in the U.S., GM Europe doesn't have the option of
filing for bankruptcy protection, because its operations in Europe
are spread out across a number of countries.
Therefore Fiat, its advisors and the German government are
scrambling to come up with a decision before the U.S. Treasury's
deadline for GM on June 1. The White House's auto task force has
given the company until this date to reach cost-cutting agreements
with workers and bondholders and begin trimming dealers, or face a
bankruptcy filing.
GM's announcement Friday that it intends to cut 1,100
dealerships was seen as an indication it may file for bankruptcy
protection soon.
Fiat's plan for GM Europe is not contingent on GM filing for
bankruptcy, the person familiar with the situation said Monday.
The issue of plant closures is politically sensitive, especially
in Germany ahead of national elections in the fall, and Marchionne
is depending on government aid to achieve his plan.
Klaus Franz, head of the workers' council at Opel, is critical
of the Fiat deal, which he fears could eliminate 18,000 jobs across
Europe.
Marchionne managed to pull Fiat out of losses in recent years
without shutting any plants, partly through the selective trimming
of staff.
Europe's car industry is plagued by overcapacity, and Marchionne
wants to migrate Fiat and Opel models on to the same assembly
platform, saving money.
The industrial plan drafted by Fiat also includes the reduction
of models produced by GM Europe units Opel and Saab, the person
said. This could pave the way for Fiat to reduce costs and have
more long-term synergies across Europe.
Saab also needs money from the Swedish government, GM said in
March. Its sales have fallen to fewer than 100,000 units in 2008
from a peak of 130,000 in 2006, partly because GM hasn't updated
its main models in years.
Fiat currently produces A-segment models 500 and Panda while
Opel produces the Agila. But C-segment, the one that counts Fiat's
Bravo, Alfa Romeo's Alfa 147 and Opel's Astra, is crucial for most
European and Asian carmakers, a segment which accounts for 27% of
the total European passenger car market. Saab makes models in the D
segment.
-By Sabrina Cohen, Dow Jones Newswires; +39 02 5821 9906;
sabrina.cohen@dowjones.com
(Jennifer Clark also contributed to this report)