After partnering up with newly bankrupt Chrysler LLC, Italian automaker Fiat SpA is now interested in acquiring the Opel unit of General Motors Corporation (NYSE: GM). In fact, according to German Economics Minister Karl-Theodor zu Guttenberg, Fiat is seeking to integrate its recent and future auto acquisitions into a new global car alliance.
After meeting with Fiat CEO Sergio Marchionne, zu Guttenberg told reporters that the Italian firm would need estimated bridge financing of 5 billion to 7 billion euros to facilitate its planned partnership with GM Europe. The Opel unit, combined with Fiat's own operations and its stake in Chrysler LLC, would form the new alliance.
Zu Guttenberg reported that Marchionne would like to initiate the new venture free of debt, but Sanford Bernstein analyst Max Warburton warned, "Given the loss-making status of all three parts of the combination, the new auto business will need cash injections to be viable." He added, "We remain unconvinced that Fiat has the management depth to pull off this very ambitious task, although we acknowledge that the company clearly keeps its talent obscured."
Elsewhere, German labor unions aren't exactly thrilled with the notion of Fiat acquiring Opel, since such a move would likely necessitate job cuts and plant consolidations.
In other GM news, the automaker is reportedly "receiving interest from multiple suitors" with regard to its Saturn unit.
At last check, GM was up more than 3%, trading shy of the $2 level. The battered Dow component has shed a hefty 92% of its value during the past 52 weeks. The stock has recently enjoyed modest technical support in the $1.60 region, but short-term options traders are betting on a pullback -- peak put open interest of 233,978 contracts lies at the June 1 strike.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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Reader Comments (Page 1 of 1)
6-14-2009 @ 2:44PM
Phentermine! said...
If they partner up with Chrysler I dont think it would be to successful. Based on the companies history of going bankrupt multiple times, they clearly are not very business savvy.