[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Wednesday, 2 February, 2005, 08:29 GMT
Fiat and GM fail to agree on sale
fiat logo
Fiat is no longer quite as attractive a brand for GM
Carmakers Fiat and General Motors had still failed to reach agreement over whether GM would buy Fiat's car unit by midnight on Tuesday.

Fiat said it can now exercise the option for GM to buy its car unit at any time from Wednesday.

Investors had bet that US-based GM would offer Fiat of Italy about 1.8bn euros ($2.4bn) in cash to get out of a deal to buy the car unit.

It is unclear what will happen now and both parties can pursue it in court.

Fiat's shares fell on the news that no agreement had been reached. They were down more than 4% in morning trading to 5.94 euros.

The GM spokesman said he had "no idea" if the two companies would end up in litigation.

"All of our options are still available to us -- that has not changed -- and we will pursue those options at the appropriate time," he said.

Deal deadlock

The mediation period ended at midnight on Tuesday.

"In spite of the attempts to resolve the dispute on the alliance's outstanding financial and industrial issues, no agreement has been reached," Fiat said in a statement.

A GM spokesman reiterated that the company believed the put option had been invalidated by restructuring moves which changed the shape of Fiat Auto.

"Fiat reasserts its view that the put option is valid, enforceable in accordance with its terms and an important asset for the group. The put is exercisable from today," Fiat said.

Fiat gained the right to sell its car division to GM as part of an alliance agreed in 2000.

GM, whose own European operations are losing money, no longer wants to own the unprofitable Fiat unit.

It has argued the deal was voided by Fiat's decision to sell off its finance arm and halve GM's stake via a capital-raising effort.

The 2000 deal resulted from a race between GM and DaimlerChrysler to ally with Fiat. The German firm wanted to buy Fiat outright.

Changed circumstances

But Gianni Agnelli, the former head of the group, wanted to keep control, and preferred GM's offer to buy a 20% stake and give Fiat the right to sell in the future, known as a "put option".

Since then, however, Fiat cars have lost market share and the firm has piled up losses, while a plan to raise new money in 2003 cut GM's stake in half to 10%.

For its part, GM's European units Opel and Saab have both had trouble, with Opel management threatening to cut 12,000 jobs.

"The last thing they need is additional production capacity in Europe," said Patrick Juchemich, auto analyst at Sal Oppenheim Bank.



SEE ALSO:
Fiat seeks pact in row with GM
15 Dec 04 |  Business
GM in crunch talks on Fiat future
14 Dec 04 |  Business
Fiat boss denies end of GM tie-up
28 Nov 04 |  Business
GM cuts 10,000 jobs in Germany
09 Dec 04 |  Business
Fiat Auto's delicate recovery
08 Mar 04 |  Business
Fiat boss Umberto Agnelli dies
28 May 04 |  Business


RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific