Page last updated at 21:36 GMT, Monday, 4 May 2009 22:36 UK

Fiat in talks over GM Europe move

Cars at the Vauxhall plant in Ellesmere Port
There are concerns about job implications if Vauxhall was sold

Italian carmaker Fiat has begun efforts to win support for its plan to take over General Motors' European business, which includes Vauxhall and Opel.

After meeting Fiat's chief executive, Germany's economy minister said the Italians wanted to take over Opel, but without running up any debt.

Karl-Theodor zu Guttenberg also said Fiat had pledged to keep the three main German factories if its bid went ahead.

GM is under pressure to sell its European interests as it restructures.

Fears for Vauxhall

GM Europe confirmed that it was in talks with "several possible investors" some of who showed "good and realistic interest".

Saab is also part of GM Europe, but may not be part of any discussions as it is being reorganised under Swedish law.

Fiat is already trying to take over some of Chrysler, the US carmaker that has applied for bankruptcy protection.

Professor David Bailey, from Coventry University's Business School, warned that any deal could cost the jobs of UK car workers.

And Tony Woodley, joint general secretary of Unite, the UK's main carworkers' union, said: "This move sends shivers down my spine."

Meanwhile, on Monday evening Canadian car parts supplier Magna International said it was also in talks with GM and German government officials about possibly taking a minority stake in Opel.

GM's key production facilities in Europe

'Consolidation needed'

Earlier, German economy minister Mr zu Guttenberg had said, after meeting Fiat Group chief executive Sergio Marchionne, that any deal would need short-term financing across Europe by the Italian carmaker of about 5-7bn euros ($6.6-9.3bn; £4.45-6.24bn).

An Opel car with a Fiat badge
Europe's sixth-largest carmaker by unit sales
Group sales of 59.4bn euros (£53.9bn; $78.8bn) in 2008
Based in Turin, north-west Italy
Employs about 200,000 people
Fiat Auto's brands include Fiat, Lancia, Alfa Romeo
Fiat Group also owns Maserati, 85% of Ferrari, and Iveco

The economy minister described Fiat's plans for Opel - which he said called for "a certain need for consolidation" - as "interesting", but said the German government would need to take time before reaching any conclusions.

Mr Marchionne is also to hold talks with the head of the Opel works council to assess the viability of a deal.

But German union official Armin Schild, who sits on Opel's supervisory board, was sceptical about whether Fiat would be an effective investor.

"I can't say if Mr Marchionne is able to save Opel, but I know that Opel and Fiat are direct competitors, producing the same types of cars for the same market, so the merger of both companies could offer little to each other and take away a lot," he said.

Job risk?

Opel employs nearly 26,000 in Germany, while Vauxhall employs about 5,000 people in the UK.

And the UK's Unite union said it opposed Vauxhall being taken over by Fiat - claiming it would be an "unmitigated disaster" that would cost jobs.

Professor Garel Rhys from the Cardiff Business School agreed that British jobs could be lost if the deal went ahead.

"General Motors has indicated they have three plants too many and those three plants too many are actually in Germany, or run by the Germans", he said.

"It could be that Fiat, knowing that the company is too big, would balk at taking on the Germans and might look for the softer option of closing a plant in the UK."

GM faces potential bankruptcy in the US and has until 1 June to restructure.

Opel has said it needs 3.3bn euros (£2.9bn; $4.3bn) to get through the economic crisis, but the German government has encouraged it to find an investor.

It has said it does not intend offering Opel a bail-out, but that it would offer investors state support.

Opel cars
Sales of $34.4bn in 2008 (£23bn; 25.9bn euros)
Operates 10 plants in seven countries
Employs about 54,500 people
Brands include Vauxhall, Opel and Saab

Mr de Montezemolo told Italy's Corriere della Sera newspaper on Sunday that a Fiat takeover of Opel would create "a very strong group"

However Canadian car parts maker Magna International has also put forward what the German government has called a "rough concept for a commitment with Opel".

There has been some doubt about whether Fiat could cope with such growth.

"They're going to be a global powerhouse, I guess. Who would have thought?" said Erich Merkle, an independent auto industry analyst in Grand Rapids, Michigan.

"It'll make them a very large automaker, but we've seen that large isn't necessarily indicative of success."

Five years ago, GM paid $2bn to avoid having to take up an option to buy Fiat's carmaking business.

GM challenge

Fiat are going to be a global powerhouse, I guess. Who would have thought?
Erich Merkle, car industry analyst

Last week GM said it was to cut 21,000 US jobs in 2009 and phase out its Pontiac brand, as it aims to meet the deadline set by the US government to overhaul its business and show that it is viable.

It has said a number of potential buyers had expressed interest in its Saturn brand in the US, and that it was proceeding to the next step in selling it.

Like US rivals Ford and Chrysler, GM has seen sales fall sharply in its core home market in recent years, a decline that has intensified as the recession has continued.

Meanwhile in the US, a court hearing into Chrysler's request for a speedy sale to Fiat was adjourned by Judge Arthur Gonzalez until Tuesday.

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