Fiat share-swap takes General Motors' global drive up a gear

PUBLISHED : Wednesday, 15 March, 2000, 12:00am
UPDATED : Wednesday, 15 March, 2000, 12:00am

General Motors' share-swap deal with Italy's Fiat is the latest step in the global expansion of the world's largest car-maker.

The United States car giant, which already controls 15 per cent of the global market, is spending US$2.4 billion for a 20 per cent stake in Fiat. In exchange, the Turin-based car-maker will become one of GM's largest shareholders, with a 5.1 per cent stake worth $2.4 billion.

Under the deal GM also secured the option to take control of Fiat's car business within five years, creating a conglomerate with as much as 20 per cent of the global car market.

Incoming GM chief executive Richard Wagoner and chairman Jack Smith, who will lead until June, have in recent months focused on plans to expand in Europe, Latin America and Asia.

GM and Fiat expect to save millions by pooling resources and jointly producing engines and components, a crucial factor in the small and medium-sized car markets where profit margins are slight.

For its part, Fiat, with a strong truck division, is looking at Swedish car-maker Volvo on the chance Brussels may block Volvo's proposed takeover of truck-maker Scania.

The Fiat tie-up continues the Detroit company's policy of allowing partners a lot of room to manoeuvre.

GM recently took over Sweden's Saab Automobile, after holding a 50 per cent stake for about a decade.

In Japan, GM holds 49 per cent of Isuzu Motors and 10 per cent of small-car-maker Suzuki Motor.