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EDITIONS
 Thursday, 2 January, 2003, 12:11 GMT
Fiat brushes off bailout offer
Fiat Stilo, the firm's newest car
Fiat's share of its home market has halved in a decade
An Italian entrepreneur has put together a rescue plan for struggling car giant Fiat Auto, but faces opposition from the car company's founding family.

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

There is only one plan approved by the board and agreed with the creditor banks and the government

Umberto Agnelli

But 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.

Fiat began pushing through a programme of 8,100 layoffs shortly before Christmas to cut the loss making car firm's $6bn debt mountain.

'No wavering'

Mr Colaninno's proposals emerged in the Italian press over the New Year break.

Fiat Auto chief executive Alessandro Barberis
New Fiat chief executive Alessandro Barberis

Mr Agnelli has responded that "there is only one plan approved by the board and agreed with the creditor banks and the government".

"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.

Investors reacted to the prospect of a rescue by sending Fiat's shares 4.3% higher on the Milan stock market in the first day of trading of 2003.

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

Long shot?

However, few were expecting an immediate welcome for Mr Colaninno's plan from Fiat's board, viewing its initial reaction as possibly the first sortie in a long campaign.

"The bottom line is that this is good news but it would involve a complete U-turn in everything at Fiat, and they will need at least a few months to thrash it all out," said one trader at a foreign stock broker in Milan.

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

Fiat's restructuring plans include the closure of a factory in Sicily, one of Italy's poorest regions.

Mediator

The centre-right 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.

His remarks were widely interpreted as supportive of Mr Colaninno's proposals when news of them emerged in the press.

Italian broadcaster Rai Radio 1 reported on Thursday that Mr Colaninno's plan had been "abruptly halted" after Mr Agnelli's remarks. It gave no further details.

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.

See also:

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