Fiat, with GM breathing down its neck, hopes for comeback
Carola Frentzen, Deutsche Presse-Agentur, Turin, Italy
Polished and brightly gleaming, the Lancia car models Thesis and Phedra hold out promise. Outfitted with the latest electronic gadetry, the luxury cars are to be the "new admiral's fleet" for Lancia, the subsidiary of the debt-ridden parent concern Fiat.
"We want credibly to regain our status as a luxury brand in Europe," Lancia marketing director Luca de Meo said at the flashy presentation of the two new cars recently. But all the glitter could not cover up the worried atmosphere at the Fiat company.
"What we have until today been providing in terms of quality and sales has been absolutely inadequate," admitted Fiat Auto managing director Giancarlo Boschetti, in surprisingly blunt self-critical language.
New strategies were needed, he added, as well as new products which can compete and a new sales network.
Boschetti said that, with its new plans, the Fiat group aimed to claim a 10 percent share of the European car market by 2004. Next year, Fiat is to reach profitability again.
Hovering over all these plans and hopes is the question as to if and when U.S. car giant General Motors will move to take over Fiat, now loaded down with some 6.6 billion euros (US$6.1 billion) in debts.
The rumors that GM might make its move sooner than many people anticipate were fueled when honorary Fiat president Giovanni Agnelli recently was in the United States for medical treatment.
His younger brother Umberto had intimated that he would be interested in a sale of Fiat. GM holds a 20 percent stake in the company, with an option to raise its share.
But then Giovanni Agnelli returned from America, and people recalled how he once said that as long as he was alive, Fiat would remain in Italian hands.
For his part, Boschetti declined to comment about the GM takeover rumors. As to press reports, he said it was "normal" for GM to have estimates made of what a takeover of Fiat would cost. The American firm has a purchase option at Fiat set for 2004, but the press reports said GM might make its move even sooner.
Further questions have been raised in another development - three creditor banks offering to provide Fiat with credits of some three billion euros in the next three years. Then Unicredito became the fourth bank to say it would join in a refinancing plan for Fiat.
Automotive industry analysts say the sum mentioned would probably only give Fiat a temporary respite. The carmaker's path out of its crisis is above all dependent on its automotive business, which is the area running up a deficit.
The analysts say it is not Fiat's debt in itself which is the problem, but rather the impossibility of being able at some point to be able to reduce the debt level due to the continuing losses in the automotive business.
Latest news from the Transportation Ministry only underscored the situation. Fiat group cars suffered a further downturn in new registrations in Italy in May. The market share of Fiat, Lancia and Alfa Romeo had fallen to 31 per cent, from 33.2 percent previously.
"We have no more time to lose," Giancarlo Boschetti says.