General Motors Corporation and Fiat have formed a strategic industrial alliance, creating a partnership for the companies in two of world’s largest automotive markets: Europe and Latin America.
The company’s say that the new partnership will create value for their shareholders through synergies in the areas of material cost reductions, leveraging of each group’s powertrain activities, efficiency in their financial service operations, and cross-sharing of automotive technologies.
These synergies amount to US $1.2 billion annually by the third year and grow to US $2.0 billion annually by the fifth year.
GM and Fiat will remain independent from one another and will continue to compete in markets around the world.
GM will acquire a 20 % stake in Fiat Auto in exchange for US $2.4 billion in GM $1-2/3 common stock. Fiat’s holdings of GM will amount to approximately 5.1 percent of GM $1-2/3 outstanding.
As part of the agreement, Fiat, at a future point in time, will have the right, if it so chooses at its discretion, to put its remaining 80 percent equity interest in Fiat Auto to GM at fair market value, and GM will have a right of first offer if Fiat decides to sell its interest. Fiat Group’s other sectors, including Ferrari and Maserati, are not involved in this transaction.
A Steering Committee, co-chaired by the CEO of Fiat Paolo Cantarella, and General Motors’ COO and President, Richard Wagoner, and formed by Roberto Testore, CEO, Fiat Auto; Gianni Coda, President, Fiat Auto Latin America; Mike Burns, President, GM Europe; and Richard Nerod, President, GM Latin American, Africa, and Middle East operations, will define the joint ventures’ strategies and will identify new possible areas of industrial cooperation such as the return of the Alfa Romeo brand to the United States as well as e-business opportunities such as in-vehicle communications involving GM’s OnStar and Fiat’s Viasat.