14/02/2005
NEWS STORY
In a move which is sure to come as good news to Ferrari president Luca do Montezemolo, General Motors (GM) is to pay Fiat £1.07bn ($2bn) as it seeks to end the five-year joint venture between the two companies and any risk of the American giant having to take on Fiat's loss making car division.
In a statement, Rick Wagoner, GM's chairman and chief executive officer said: "GM and Fiat have agreed that it is in the best interest of their companies and shareholders to terminate the master agreement.
"GM has derived significant benefits from its association with Fiat Auto, including the accelerated development of diesel engines, cost savings and the joint development of certain vehicle programmes. With this settlement, our overall financial returns will have been favourable."
In 2000, GM bought a 20% slice of Fiat Auto, later reduced to 10%, with the American giant having the option of purchasing the car division at a later date. However, this was in the 'good old days' and subsequently both companies ran into trouble, particularly Fiat Auto. At one point, clearly sensing a crisis, GM claimed that Fiat Auto had invalidated the agreement - whereby they'd purchase the car division - by radically restructuring.
Although the decision has cost GM £1.07bn, this is nothing compared to the sort of money that Fiat Auto's debt would have cost, rumoured to be around £5.4bn.
It's widely believed that Ferrari, could be put up for public floatation, today's news could possibly accelerate such a move.