Fiat will not negotiate a cost-sharing alliance with another carmaker this year

Article by Christian Andrei, on March 16, 2012

Fiat is much too focused on its own operations and its expansion plan in China and Russia to start negotiations for a cost-sharing alliance with another carmaker this year, a source told Reuters. Sergio Marchionne, the CEO of Fiat and Chrysler, has spoken many times about entering alliances in order to cut costs.

But when news broke out that PSA/Peugeot-Citroen has linked up with General Motors Co. on a deal meant to save $2 billion in annual costs by 2017, Fiat lost its major options for a partner in Europe. The source said that Fiat doesn’t have any time for “extravaganza” this year. Fiat had hoped to partner with either Peugeot or GM.

In fact, Marchionne had met up with both firms in the past year. Fiat won’t be favored by the Peugeot-GM deal since it won’t result to any capacity cuts, which industry executives require so its losing European operations could return to profit. Analysts said that Fiat could still afford not to hastily search for other companies to form an alliance with.

Fiat still has 20.7 billion euros ($27.41 billion) in cash, which it can use to survive weak market conditions. In 2009, Marchionne met with Peugeot's CEO Philippe Varin to talk about sharing powertrains and platforms, according to another source.

However, the talks didn’t progress because the Peugeot family wasn’t interested. These talks took place before the negotiations between Peugeot and GM even started. The source added that Varin wanted the alliance but it didn’t hold any interest for the Peugeot family.

The discussions between Varin and Marchionne were said to be a natural process since they knew each other from in 1990s, when both worked in the aluminum business. Another reason is because the companies already had a joint venture for light trucks. Insiders said that the talks had not reached board level.

Topics: fiat

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