A revolution at Fiat

The European car industry could be turned on its head if a deal being proposed by Fiat's chief executive Sergio Marchionne comes to fruition. Marchionne has done a good job in recent years reviving Fiat, but the company still has debts of around $8.8bn. Marchionne wants to save the day by accelerating out of the recession rather than hunkering down and saving money. His goal is to put together a new automotive empire by combining Fiat's automobile operations with GM's European assets and the remains of US giant Chrysler. If Marchionne dreams come true it would create the world's second biggest automobile company - after Toyota - with annual sales of around six million cars. The plan involves Fiat spinning off its automotive business into a new company, which would be publicly traded. This would include the rights to exploit the Fiat, Lancia, Alfa Romeo, Maserati, Opel, Vauxhall, Saab, Dodge, Chrysler and Jeep brands. Reports suggest that Ferrari would remain with the Fiat parent company and that Alfa Romeo subsidiary Maserati would also be held back and might be reintegrated into a smaller luxury car group with Ferrari. That did not work the last time it was tried and caused Ferrari considerable losses.

The new company would be able to generate economies of scale that would make it much more viable. Marchionne is hoping that various European governments will help fund the new plan, in order to save jobs. Ferrari is likely to be able to stand on its own two feet. It is expanding its sales in Eastern Europe, Asia and the Middle East, while also building up its non-automotive products. The company will open a new store selling merchandise on London's Regent Street later this week.

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