GM's European future is still hanging in the balance

Fiat's talks with German government over Opel also include Vauxhall in the UK

The German government described Fiat's plans to take over GM Europe as "interesting" yesterday, but gave no further hint of an outcome from the talks.

Fiat's chief executive, Sergio Marchionne, fresh from last week's deal to take a 20 per cent stake in beleaguered Chrysler in the US, was in Berlin yesterday to try to sell his vision of a new automotive behemoth.

Meanwhile Magna International, the Canadian auto parts giant that has also pitched for GM Europe to the German government, has reportedly signed up Sberbank, Russia's biggest bank, and Gaz, the country's second-biggest car company.

GM has been looking for a buyer for its European operations since March in an attempt to put its main US business back on a sure footing and stave off collapse. Although the German government has no official role in any takeover talks, its decision on credit guarantees will likely prove a deal breaker for any potential suitor. In the run-up to September's general election, job losses are a key factor for German policymakers. GM's Opel marque employs 25,000 people in Germany and the company suggested earlier this year that some of its German factories could face closure in order to cut excess capacity.

The plan laid out by Mr Marchionne yesterday reportedly maintains Opel's three assembly plants in Germany, but the future of the engine factory at Kaiserslautern is less certain. It avoids further debt for Fiat, but needs €5bn-€7bn in bridging finance from governments.

The German government is keeping its options open. "It is an interesting approach, without question," Karl-Theodor zu Guttenberg, the Economy Minister, said after yesterday's meeting.

If the deal went ahead, the newly expanded company – including Fiat's car business as well as Chrysler and GM Europe – would produce 5 to 6 million vehicles per year and generate annual revenues of €80bn, according to Mr Marchionne. The plan is for Fiat to spin off the new business and list it separately from the rest of its operations.

Opel accounts for the majority of GM's European operations, but Vauxhall in the UK still contributes around a quarter. The UK government is also closely involved in the Fiat talks, in the interests of Vauxhall's 5,000 staff.

Unite, the trade union, is concerned that a finance deal with the German government will secure the future of factories there, at the expense of GM Europe's other plants, including the two UK factories at Ellesmere Port and Luton. But Professor Garel Rhys, at Cardiff Business School's Centre for Automotive Industry Research, says that although Vauxhall is only a peripheral concern in an essentially Italian-American deal, a Fiat takeover does not spell bad news for the UK division.

"The UK business is very much at the margins of this deal, but if I worked at Ellesmere Port I would be less worried now than I was last week," Professor Rhys said. "The factory itself is efficient and doesn't lose money, and Fiat has both a huge presence in Europe and a desire to build up goodwill in the UK."

A more serious concern is the scale of the undertaking Fiat is attempting. "It is taking an enormous risk – it is difficult enough to put one merger together, to try to put two together at once is bordering on suicidal," Professor Rhys said. "The plan raises memories of the 1960s, when the UK motor industry when through one undigested merger after another which culminated in the chaos of British Leyland."

Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution