Fiat shares rise on rescue hopes

Fiat's share of its home market has halved

Growing hopes of a rescue plan for struggling Italian carmaker Fiat have pushed its shares 7% higher.

The Italian industry minister is reported in local press to have described the offer of entrepreneur Roberto Colaninno as a "positive development".

Mr Colaninno, the ex-chairman of Telecom Italia, is reported be offering to inject 8bn euros (£5.2bn; $8.3bn) into the debt-ridden company in exchange for a substantial shareholding.

He is also thought to be pitching to be chief exectuive and vice-chaiman of the firm.

Fiat is in the middle of a highly contentious restructuring plan, shutting factories and laying off thousands of workers in order to reduce debts at its Fiat auto unit.

Opposition

While the government seems optimistic, the "friendly" rescue plan has met with initial opposition from Fiat's founding family.

Umberto Agnelli, who heads the family-owned holding company that controls Fiat Auto through a 30% stake, has said the car maker would be sticking to its existing restructuring plan.

"The absolute priority for Fiat Auto today is to work calmly to advance the tough industrial programme underway," the Italian news agency Ansa reported him as saying.

Fiat began pushing through a programme of 8,100 layoffs shortly before Christmas to cut its $6bn debt mountain.

Intervention

But the job cuts have resulted in high-profile protests throughout Italy.

And the Italian Government has taken a strong interest in the future of the iconic car maker, which is part of the country's biggest industrial conglomerate.

The right-wing government of Prime Minister Silvio Berlusconi held talks with Fiat's management and unions in December in an attempt to soften the impact of job cuts.

In his end of year press conference, Mr Berlusconi said he hoped Italian businesses would step in to invest in Fiat and reaffirmed his government's willingness to intervene.

Demise

Fiat's market share in Italy has slumped from 60% to 30% in just a decade and its debt problems led to a "junk" ranking from Moody's credit rating agency.

The shares had been at a 20-year low as the market closed for 2002.

Fiat shares jumped closed 7.4% higher at 9.27 euros on the Milan Stock Exchange.