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Fiat moves a gear up in global drive

FIAT Group SpA confirmed on Sunday that it is in talks to buy most of General Motors Corp's European operations, taking another step toward creating a global automotive powerhouse.

Fiat also said it is evaluating the possible spin-off of its auto business to form the core of a new company.

Fiat Group Automobiles includes the Fiat, Alfa Romeo and Ferrari brands. In addition, Fiat is in the process of acquiring United States auto maker Chrysler LLC without putting up any cash.

The new auto company, which according to Fiat would have US$105 billion in annual revenue, would put the Italian auto maker in markets where it has little or no presence, including North America, the second largest market in the world.

"They're going to be a global powerhouse, I guess. Who would have thought?" asked Erich Merkle, an independent auto industry analyst in Grand Rapids, Michigan. "They seem to be on a buying binge right now, looking for cheap and distressed assets like Chrysler and Opel."

The Chrysler deal, which must still be approved by a United States bankruptcy court, would be in exchange for giving Chrysler access to Fiat's small-car and engine technology. Chrysler cars and trucks also would be sold by Fiat through its global distribution network.

The deals would make Fiat a big global player, but that might not be the best thing for the Italian auto maker, which might be overreaching with the acquisitions, said Merkle.

"This is a lot to take on, quite honestly," Merkle said. "When you start looking at Chrysler, it'll make them a very large auto maker, but we've seen that large isn't necessarily indicative of success."

It will take years, Merkle said, for Fiat to gain any synergies by globalizing design, engineering and manufacturing operations with Chrysler and the GM units.

The Fiat statement was issued on the eve of a meeting in Berlin between Fiat CEO Sergio Marchionne and the German economy and foreign ministers to discuss Fiat's offer for GM's German unit, Opel.

GM Europe also includes the British company Vauxhall and the Swedish car maker Saab. Saab may not be included in the deal, however. The company is being reorganized under Swedish law and is likely to be separated from the rest of GM's European operations.

GM Europe spokesman Frank Klaas said the company has several possible investors, which he wouldn't identify, but said, "we are in very good negotiations with them."

GM also makes and sells small Chevrolet-badged cars in Europe that are designed in South Korea by the company's Daewoo unit, and it's unlikely to sell that because that would be GM's only remaining foothold in Europe, Merkle said.


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