Fiat's new executive team is setting ambitious cost-cutting targets and seeking to speed up co-operation between ailing Fiat Auto and General Motors. The moves come just weeks after it installed Giuseppe Morchio as chief executive and Umberto Agnelli as chairman. From Fred Kapner in Milan
Fiat Auto and GM are outlining plans for shared inventories, delivery and other areas, while exploring wider use of common parts and platforms. Fiat is also eager to discuss greater co-operation for its operations in Brazil and Asia.
Fiat Auto and GM, which owns 20 per cent of the Italian carmaker, last year each saved more than €350m, mostly from joint purchasing. Even before current talks, that figure was expected to rise to €1 billion in 2005, when several new models will share engines, gearboxes and platforms.
Morchio and Agnelli are charged with turning Fiat Auto round and radically improving thin margins at CNH, the world's largest farm and construction equipment maker, and at lorry-maker Iveco. Their most delicate task remains convincing GM that it can profit from Fiat Auto, which suffered an operating loss of €1.3 billion last year and which analysts say could lose €700 million this year.
Increasing GM and Fiat Auto's savings through greater logistical co-ordination could help induce GM to participate in a €2 billion capital increase that Fiat Auto plans to undertake in coming months, Fiat's executives and bankers hope. This in turn would ease tension over Fiat's put option that allows it to sell the remaining 80 per cent of Fiat Auto to GM between January 2004 and mid-2009.
Delaying the need to exercise or renegotiate the put would relieve pressure from the Italian government on the Agnelli family, which controls 34 per cent of Fiat, to keep the carmaker in Italian hands.
Indeed, Fiat executives are hoping that improved industrial co-operation will lead in coming years to a natural "fusion" of many of Fiat Auto's operations with GM Europe. Morchio helped during the 1990s to turn round Pirelli, the tyre and cable maker. He brings a new, more hands-on approach to daily operational problems, Fiat insiders said.
... - Financial Times Service