Fiat Sells its Stake in GM for $1.16 Billion

Milan December 20, 2002; Fred Kapner wrting for FT reported that crisis-hit Fiat said on Friday that it had sold its entire stake in partner General Motors of the US for about $1.16bn to an unnamed investment bank in a move that will help cut its net debt.

In a statement late on Friday, the Italian industrial group said the sale of its 32.05m GM shares would have "no impact on the industrial relationships or contractual arrangements between Fiat and GM". The stake accounts for about 5 per cent of GM stock.

GM bought 20 per cent of Fiat's car unit Fiat Auto for $2.4bn in stock in 2000 but wrote that down to $220m this year. Fiat has an option to force the US car manufacturer to buy the other 80 per cent from 2004.

Fiat has promised creditor banks to cut net debt to EU3.6bn by early 2003 from EU5.8bn at the end of September. The sale of the GM stock is expected to stave off the downgrading of Fiat's debt to junk bond status by rating agency Moody's Investors Service.

The agency last month threatened such action after Fiat reported disappointing third-quarter results including a EU1.1bn loss for the first nine months of the year at Fiat Auto.

Fiat this week reached an agreement in principle to sell 51 per cent of Fidis, its European car financing division, to its creditor banks.

That sale will reduce Fiat gross debt by EU6bn to about EU27bn.

Fiat has been in talks for the past five months with the banks to conclude the deal before the year-end.

Fiat and GM share platforms, gearboxes and power trains.