Latest news on Fiat's plan to gobble up GM-Europe

By Tim Pollard

Motor Industry

15 May 2009 10:18

With just over a fortnight until General Motors’ fate is sealed, moves to rescue GM’s European car making division are accelerating. Fiat – already named as the Obama-blessed partner for bankrupt Chrysler in the US – is now wooing Opel, Vauxhall and Saab in Europe.

If successful, Fiat would overnight become the second biggest car making business in the world. If it gets it wrong, it could overnight adopt some of the sickest and cash-strapped businesses on the planet and never quite recover from the heaviest of millstones around its neck.

We’ve already analysed Fiat’s alliance with Chrysler. Now we’ve sat down with one of Fiat CEO Sergio Marchionne’s right hand men to talk about the Italians’ latest ambitious plans for world domination. This is our guide to the latest developments in Europe.

Marchionne sees modernised companies producing good cars that have been caught up in the financial meltdown. Opel and Vauxhall are essentially strong businesses, hamstrung by the legacy of a failed, lumbering parent company. Fiat’s boss is desperate to find partners to make Fiat bigger and stronger – the only path for survival in an industrial landscape forever changed.

It’s all about economies of scale. Marchionne is desperate to establish Fiat as a proper volume car maker; he’s on record as saying anyone producing fewer than 5.5 million vehicles a year will struggle. His vision is of a world where giants will prosper and the mid-market will fade away.

Yes, perhaps surprisingly. Saab is included in the talks taking place in Turin and Berlin (and Brussels and London and Detroit and Stockholm and many other capital cities you care to mention). GM had washed its hands of Saab, forcing the brand to seek bankruptcy protection in the Swedish law courts as it sought new owners as an independent concern. But that process is effectively on hold, while they work out if Fiat could be the knight in shining armour.

All of the European businesses concerned have form. Fiat was part owned by GM until it exercised its ‘put option’ in 2005 and went independent. But the two companies continue to operate closely; the Vauxhall Corsa and Grande Punto use the same architecture underneath the skin, for instance. Two decades ago there was the four-way ‘Type 4’ cooperation between Fiat (Croma), Alfa Romeo (164), Saab (9000) and Lancia (Thema). Mind you, that partnership didn’t exactly set the world alight, so what’s going to be different this time?

By Tim Pollard