General Motors has told the Fiat Group that the "put" option to force a buy-out of its automotive division, which can be exercised from next year, presents legal problems. It was believed that GM would complete its acquisition of Fiat Auto as soon as possible, but that now looks unlikely.
The world’s biggest car manufacturer, General Motors, has told the Fiat Group the "put" option to force a buy out of its automotive division, which can be exercised from next year, presented legal problems. It was believed that GM would complete its acquisition of Fiat Auto as soon as possible, but that now looks unlikely.
CARtoday.com reported recently that the embattled Fiat Group would refocus on its car manufacturing enterprises, retrench 12 300 workers, boost capital and invest billions of euros in a bid to return to net profit in three years. The plan was designed to steer the Italian conglomerate, which owns Fiat Auto (including Fiat, Alfa Romeo, Ferrari and Maserati), away from its interests in aircraft engines, insurance and agricultural implements, and allow the group, as a whole, to break even at an operating level in 2004.
Even though Fiat Auto is seemingly on its way to recovery, Fiat chief executive Giuseppe Morchio said GM was convinced there were strong legal problems that could render the option Fiat has - to force the US carmaker to buy the division - invalid.
The statement goes beyond GM's public position, which has been to raise questions about the option but go no further. It has never said the put was already invalid.
However, Morchio told investors that his own legal advice was that the "put" option was enforceable, according to shareholders who attended the meetings.
Morchio was brought in by Umberto Agnelli, chairman and senior member of the controlling family, this year to rescue the company while retaining the car arm. Both have insisted they have no intention of exercising the put. However, they have refused to surrender the option, something GM has demanded in return for its participation in a R37,7 billion recapitalisation of the Fiat Auto unit.
Original article from Car