Fiat Lays Out Plans for New Global Car Company

New company would produce 6-7 million vehicles per year

The boss of Italy's Fiat drummed up support in Berlin on May 4 for audacious plans to snap up GM's European arm and combine it with the bankrupt Chrysler to create a new global auto giant. Sergio Marchionne met German ministers to tout what he called a "marriage made in heaven" to create a new behemoth with revenues of 80 billion euros (US$106 billion) making between six and seven million vehicles every year.

The new firm, which Marchionne wants to see quoted on the stock exchange, would be second only to Japan's Toyota, bigger than General Motors and Ford and around the same size as Germany's Volkswagen, Europe's biggest automaker.

Under one roof would be Fiat, GM's Opel, Vauxhall and Saab units, and Chrysler, in which Fiat agreed last week to take an initial 20% stake, which would rise to 51% if Chrysler paid back massive state loans.

It would make everything from gas-guzzling Jeep sports utility vehicles in the U.S. to Opel's mid-range Astras and Insignias and the Italian firm's tiny and successful Fiat 500.

Germany's Opel forms the core of GM's European operations, and Marchionne needs the approval of Chancellor Angela Merkel's government in Berlin for any deal to go through -- something that Marchionne wants in 30 days. GM has been trying for some time to offload a majority stake in Opel and the German government might be prepared to sweeten any deal by offering state-backed guarantees on its loans.

In March, GM Europe executives presented Berlin with a restructuring proposal that includes 3.3 billion euros in public aid from Germany and other European countries where it has factories.

GM has 55,600 employees in Europe including 26,000 at Opel in Germany, and with September elections fast approaching Merkel is keen to avert a collapse of the firm, an industrial icon dating back to the 19th century. But Economy Minister Karl-Theodor zu Guttenberg and Foreign Minister Frank-Walter Steinmeier -- meeting with Marchionne on May 4 -- will take some convincing. "Anyone interested in Opel has to present a long-term vision. We are not going to tolerate any financial adventures with taxpayers' money," zu Guttenberg warned in the Bild am Sonntag newspaper this weekend.

Germany's powerful trade unions are also sceptical, with IG Metall chief Armin Schild telling the Tagesspiegel newspaper that he opposed a deal with Fiat.

Opel "would not be strengthened but weakened and the domination over Opel would not end, it would be moved from Detroit to Turin," Schild said, preferring a tie-up with Canadian auto parts maker Magna.

"You are always taking a big gamble when you do something completely new," Marchionne told the Financial Times, which estimated that up to 9,000 jobs could be cut in the merger.

If Marchionne's vision becomes reality, Fiat would emerge as one of the winners of the global recession by seizing advantage of the devastating crisis that has engulfed the Detroit "Big Three" car makers since last year.

Copyright Agence France-Presse, 2009

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