Fiat backs out of Friday Opel talks
MILAN: Officials from automaker Fiat will not attend Friday's talks with the German government about its offer for Opel, blaming Berlin's "unreasonable" funding demands, but the Italian car maker stressed that it was not withdrawing its bid for General Motors Corp.'s European unit.
Fiat CEO Sergio Marchionne said in a statement that a requirement that Fiat provide Opel with emergency funds while the government decides the timing and conditions of bridge financing would expose the Turin-based company to "unnecessary and unwarranted risks." Because Friday's meeting will focus specifically on emergency funding for Opel, Marchionne said Fiat would not be attending the talks.
Marchionne took part in marathon talks in Berlin with German officials, including Chancellor Angela Merkel, that ended early Thursday without a result after GM officials said the company would need euro300 million ($418 million) in immediate funding.
Marchionne said it was "unreasonable" to expect Fiat to provide such funding because it had not yet had full access to Opel's financial records and could not determine "its precise financial condition and thus properly frame a merger proposal that would be fair" to both sides.
"The emergency nature of the situation cannot put Fiat in a position to take on extravagant risks. We have already offered to contribute our auto business assets to the merger on a debt-free basis and thus provide substantial ... equity to the merger." Fiat's assets would generate cash that would "stabilise the performance of the combined entities during the integration and restructuring process," he said.
Taking over GM's European operations, including Opel and Britain's Vauxhall, is a key part of Marchionne's strategy of creating a car company with the capacity to produce 6 million cars a year, the threshold he says is necessary for an automaker to survive. Fiat is on the verge of taking control of a 20 percent stake in Chrysler, pending the completion of restructuring in bankruptcy court in New York.
Fiat said "it remains open and committed" to continue discussions regarding Opel.
"Fiat did all it had to do," Fiat Chairman Luca Cordero di Montezemolo told reporters at Friday's annual meeting of the Bank of Italy in Rome. "There is a great opportunity to create Europe's second largest carmaker. If the conditions are right, good, but we can't go beyond that." Fiat has not released details of its offer, although Marchionne has said about 10,000 jobs across Europe would be on the cutting block. Opel employs 25,000 in Germany making potential job cuts a politically hot issue in an election year.
Germany is hoping to secure an agreement to protect Opel from a looming GM bankruptcy court filing. The government wants to make Opel legally independent under a trustee, then provide bridge financing while Opel looks for a new, permanent owner.
Besides Fiat, Canadian auto parts maker Magna International Inc. has submitted a bid along with Russian lender Sberbank.
While it is up to GM to choose any new investor, Germany plays a key role. It will decide whether a new owner would get further government assistance to make the deal happen, and if so what kind.
Germany has so far committed to euro1.5 billion in bridge funding.
Berlin has requested further information from GM and the U.S. Treasury Department before decisions can be made, which was expected on Friday.