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."