GM Says Agreement to Take Over Fiat Auto May Be `Unenforceable' - Tilted Forum Project Discussion Community

Spyder_Venom · 08-11-2003, 12:46 PM

Aug. 9 (Bloomberg) -- General Motors Corp., the world's largest automaker by sales, said an agreement to take over Fiat SpA's unprofitable auto division may be ``unenforceable'' and that it's negotiating with Fiat for alternative terms.

The U.S. carmaker owns 10 percent of Fiat Auto after a capital increase at the Italian unit, the Detroit-based company also said yesterday in a quarterly filing with the Securities and Exchange Commission. It bought a 20 percent stake in 2000.

An accord reached then gives Italy's largest manufacturer the right to force General Motors to purchase all of Fiat Auto at fair market value beginning Jan. 24 next year. Further discussions on alternatives to that pact are planned, General Motors said in the regulatory filing.

The option may be ``nonexercisable'' under other portions of the 2000 agreement or ``unenforceable'' because of actions ``Fiat has taken or may take,'' the U.S. carmaker said. General Motors provided no detail on the other portions of the agreement or what Fiat actions might affect the terms.

If it were forced to take over Fiat Auto, the action would have a ``material adverse affect,'' General Motors said.

Fiat is cutting jobs, closing factories and selling assets to try to rescue the 104-year-old carmaker controlled by the Agnelli family. Fiat's share of the Italian car market, its largest, fell to a low of 27 percent in June as the maker of Fiat, Alfa Romeo and Lancia cars lost ground to rivals.

Revamping Fiat Auto

Giuseppe Morchio, the company's fifth chief executive officer in a year, has said he aims to revamp the car business so Fiat doesn't have to exercise an option to sell the rest of Fiat Auto to General Motors starting next year. The two companies jointly make engines and purchase parts.

Morchio plans to invest 9 billion euros ($10 billion) in new products and overhaul its car dealer network over the next four years.

General Motors said that Fiat had informed it that its stake in Fiat Auto was now 10 percent because the U.S. company didn't participate in a recapitalization of the division. Fiat made a 3 million-euro contribution used to pay inter-company debts to Fiat or its affiliates, General Motors said.

General Motors stock rose 27 cents to $36.98 yesterday in New York Stock Exchange trading. Fiat's shares fell 8 euro cents to 5.80 euros yesterday in Milan.

http://quote.bloomberg.com/apps/news...M&refer=europe

08-11-2003, 12:46 PM	#1 (permalink)
Spyder_Venom Psycho Location: MN	GM Says Agreement to Take Over Fiat Auto May Be `Unenforceable' Aug. 9 (Bloomberg) -- General Motors Corp., the world's largest automaker by sales, said an agreement to take over Fiat SpA's unprofitable auto division may be ``unenforceable'' and that it's negotiating with Fiat for alternative terms. The U.S. carmaker owns 10 percent of Fiat Auto after a capital increase at the Italian unit, the Detroit-based company also said yesterday in a quarterly filing with the Securities and Exchange Commission. It bought a 20 percent stake in 2000. An accord reached then gives Italy's largest manufacturer the right to force General Motors to purchase all of Fiat Auto at fair market value beginning Jan. 24 next year. Further discussions on alternatives to that pact are planned, General Motors said in the regulatory filing. The option may be ``nonexercisable'' under other portions of the 2000 agreement or ``unenforceable'' because of actions ``Fiat has taken or may take,'' the U.S. carmaker said. General Motors provided no detail on the other portions of the agreement or what Fiat actions might affect the terms. If it were forced to take over Fiat Auto, the action would have a ``material adverse affect,'' General Motors said. Fiat is cutting jobs, closing factories and selling assets to try to rescue the 104-year-old carmaker controlled by the Agnelli family. Fiat's share of the Italian car market, its largest, fell to a low of 27 percent in June as the maker of Fiat, Alfa Romeo and Lancia cars lost ground to rivals. Revamping Fiat Auto Giuseppe Morchio, the company's fifth chief executive officer in a year, has said he aims to revamp the car business so Fiat doesn't have to exercise an option to sell the rest of Fiat Auto to General Motors starting next year. The two companies jointly make engines and purchase parts. Morchio plans to invest 9 billion euros ($10 billion) in new products and overhaul its car dealer network over the next four years. General Motors said that Fiat had informed it that its stake in Fiat Auto was now 10 percent because the U.S. company didn't participate in a recapitalization of the division. Fiat made a 3 million-euro contribution used to pay inter-company debts to Fiat or its affiliates, General Motors said. General Motors stock rose 27 cents to $36.98 yesterday in New York Stock Exchange trading. Fiat's shares fell 8 euro cents to 5.80 euros yesterday in Milan. http://quote.bloomberg.com/apps/news...M&refer=europe __________________ The local track whore