MARCH 19, 2005

Chinese to rescue Fiat Auto?

There is speculation in the German media that Fiat Auto may have found a saviour in the Shanghai Automotive Industry Corporation, the Chinese car company which is in the process of completing a joint venture agreement with the ailing British car firm MG Rover. Discussions between Fiat Auto and SAIC have been made public by Fiat although this was only related to possible deals in the Chinese market. However it is logical that such a deal could lead to a bigger involvement. Both companies have previously denied the stories but the statement from SAIC was carefully worded.

"At present, SAIC has not signed an agreement with any company related to the restructuring of Fiat," the company said in January.

SAIC has joint ventures with Volkswagen and General Motors in China but is looking to expand internationally and has money to spend. Last year it acquired a 49% shareholding in South Korean company Ssangyong.

SAIC is one of the three top automobile groups in China but only recently consolidated all of its automotive assets in a company called the Shanghai Automotive Group. These include Shanghai Volkswagen, a joint venture established in 1985 which builds VW Santana, Passat, Polo and Golf models at Anting International Auto City in the northwestern suburbs of Shanghai, producing 450,000 cars a year. The company recently took over GM's shares in Jinbei GM, which was established in 1998 to build Chevrolet Blazers in China. A separate joint venture with GM known as Shanghai GM also builds Buick Regal, Excelle, Sail and GL8 models, building 200,000 vehicles a year.

The future of Fiat Auto is important to Formula 1 because its financial success will help secure Ferrari's future in Grand Prix racing as the company has been underwriting Ferrari's F1 activity for many years.