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Fiat boss sees savings in merger with Opel

A Fiat tie-up with GM's Opel unit would allow "immense" cost savings, the Italian auto maker's boss was quoted Tuesday as saying, arguing the two companies would be a good fit.
/ Source: The Associated Press

A Fiat tie-up with General Motors Corp.’s Opel unit would allow “immense” cost savings, the Italian auto maker’s boss was quoted Tuesday as saying, arguing the two companies would be a good fit.

Fiat Group SpA is trying to build a global automaking powerhouse. Last week, it struck a deal that eventually could give it a controlling interest in Chrysler LLC; now it is negotiating to buy GM’s main European unit, which includes the Opel, Vauxhall and Saab brands.

Italian Premier Silvio Berlusconi was optimistic about the potential partnership Tuesday, saying such a tie-up would be “a dream for Fiat shareholders, workers, and all Italians.” Asked if the marriage was possible, Berlusconi told a late-night talk show: “I think so.”

In an interview published by the Bild daily a day after he presented his plan to German officials, Fiat Group CEO Sergio Marchionne dismissed suggestions that Fiat and Opel — both of which focus on small cars in Europe — would fit poorly.

“The models fit together very well and complement each other,” Marchionne was quoted as saying. “But what is more important is that we can build cars on a common platform and so save immense costs.”

He pointed out that the two companies were already working together, citing Fiat’s Punto and Opel’s Corsa as examples of where components are shared.

“Opel and Fiat build a million cars on the same platform,” he said.

Fiat’s plans have raised concerns about job cuts among Opel employee representatives.

After meeting Marchionne on Monday, German Economy Minister Karl-Theodor zu Guttenberg said that, while Fiat would keep Opel’s three German assembly plants, the future of an engine plant in Kaiserslautern was not guaranteed.

Germany and others are keen to safeguard the future of GM’s European operations, which employ some 54,500 people. Adam Opel GmbH employs about 25,000 workers in Germany.

Marchionne said that Fiat does not want to close any of the four plants in Germany, but work forces would have to be reduced, Bild reported.

“The plants must become more efficient,” Bild cited Marchionne as saying.

“Opel can never earn money at its current size and if you don’t earn money, you can’t survive,” Marchionne was quoted as saying. “I understand the unions’ fears — but that’s reality.”

Late Tuesday, Fiat denied a report by the daily Frankfurter Allgemeine Zeitung that the car maker planned to close 10 factories in Europe and cut 18,000 jobs if it took over Opel and Vauxhall.

The paper cited an “internal strategy paper” and said Opel planned to close plants in England, Belgium and Italy. The four factories in Germany would remain open, but production would be scaled back.

Fiat said in a statement that the report was “not information generated by Fiat and does not form part of any plan prepared by Fiat.”

Marchionne also told Bild that: “I would have no problem with it if the headquarters of the new Fiat-Opel company is in Germany and Italy.”

Guttenberg said Monday that the Fiat plan envisions “a German headquarters” as well as the Opel brand being maintained, but did not elaborate on what exactly that would mean.

Guttenberg said Monday that Fiat wants to invest in Opel without running up debt and that it estimates the short-term financing needs — stemming from GM’s debts and pension obligations — at some euro5-7 billion ($6.6-9.3 billion) Europe-wide, which could be covered by loan guarantees from various governments.

Marchionne argued that state support “should not last too long,” Bild reported. “The state has no place at Opel in the long run.”

“We must make it without tax money — so we want to pay back the guarantees in three years at the latest,” he was quoted as saying.