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Monday, May 4, 2009

Fiat and GM Europe to merge?

Here's a breaking Fiat Press Release with HUGE implications:

Fiat Board of Directors

The Board of Directors of Fiat met today to review the recent agreements concluded with Chrysler.

The Board also expressed its full support for the initiative to be undertaken over the next few weeks by its Chief Executive Officer, Sergio Marchionne, to assess the viability of a merger of the activities of Fiat Group Automobiles (including the interest in Chrysler) and General Motors Europe into a new company.

Such a transaction would result in the creation of an automotive group with approximately €80 billion ($105 billion) in annual revenues.

As part of this process, the Group would evaluate several corporate structures, including the potential spin off of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe.

The objective of these transactions is to ensure the most favorable conditions for the strategic development of the automotive sector.

Turin, 3 May 2009

So what does this mean? According to Reuters, If Fiat and GM Europe merge this would put Fiat as the world's second largest automaker, with about 80 billion euros ($105 billion) in revenue and annual sales of 6-7 million units. Fiat is currently Europe's sixth largest car maker by unit sales.

One of Marchionne's key proposals is to spin off Fiat Automobiles and combine that as a newly listed company with Opel. Fiat has considered spinning off of its automobiles division, from which it derives half its revenues, for several years.

Fiat Group Automobiles designs, produces and sells cars world-wide under the Fiat, Alfa Romeo, Lancia, Fiat Professional (light commercial vehicles) and Abarth brands. Maserati and Ferrari, are also part of the Fiat Group.

GM Europe includes German car maker, Adam Opel, its British sister brand, Vauxhall, and Sweden's Saab. However Saab might not be included in the deal as it is currently being re-organized under Swedish law and may be separated from the rest of GM's operations.

For Fiat, this is a wild turn of events for a company facing bankruptcy in 2004. We'll be watching this one closely.

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