Fiat plan to acquire GM's Opel baffles analysts

24 April 2009

Fiat SpA's plan to take over the struggling US car giant General Motors' German subsidiary, Adam Opel GmbH, has surprised analysts as the Italian carmaker reporting huge losses for its first quarter of 2009.

 According to a report in German magazine Der Spiegel, Fiat has ''discussed a potential deal with government negotiators in Washington, executives at GM and representatives of the German government,'' on a possible acquisition of Opel.

Although the move seems to make sense with the restructuring of GM, which has already accepted US administration's bailout money of about $9 billion, analysts are wondering how long Fiat will be able to hold on with such investments.

 Fiat is already in discussions with Chrysler to acquire a minority 20-per cent stake in the company, the deadline for which is set by 30 April. If the deal could be signed within the time frame, the Obama administration has said that it could get an additional $6 billion in loans.

 Further, the analysts point out that the Italian giant reported a loss of €410 million ($531 million) in the first quarter, compared with earnings of €405 million for the same period last year. Fiat sold 2.15 million cars in 2008, and its revenue fell 25 per cent, to €11.3 billion.

Opel union leaders and some German government officials oppose any deal with Fiat, because they fear that an alliance would result in more job losses than a takeover by Magna International of  Canada, also a front-runner for Opel.