Fiat: No Deal Yet in Meeting With GM

Rome December 15, 2004 8AM: The two parties met at an undisclosed location Tuesday where Fiat chief executive Sergio Marchionne was expected to insist to GM chairman and chief executive Rick Wagoner that the U.S. company honor a "put option," part of a 2000 deal under which Fiat has the right to sell its car business to GM.

In a statement released Wednesday, Fiat said that no agreement had been reached "on financial and industrial subjects relevant to the alliance" between the two companies.

Fiat shares dropped by 1.31 percent to 5.97 euros ($7.98) in early trading Wednesday on the Milan stock exchange following the news, news agency ANSA reported.

The Fiat statement said GM would request a mediation process with the aim of "resolving the dispute before resorting to other means, including legal ones."

The statement comes on the day on which Fiat can begin legal action against General Motors regarding the 2000 contract, which says the Italian company can legally compel GM to acquire the 90 percent it doesn't already own of Fiat Auto, the unprofitable car division of Fiat SpA.

However, the contract allows for a window for mediation. Fiat said that once they receive notification of GM's request for mediation the two parties would have 30 working days in which to hold a further meeting between their chief executives and reach an agreement, otherwise "either party may seek legal remedies."

Fiat's press office in Turin said Wednesday that they considered that the "put option" was still valid and could be enforced.

GM, the world's largest automaker, has expressed doubts over the possibility of Fiat exercising the option, and the two companies last year agreed to postpone the trigger by one year to Jan. 24, 2005.

Taking Fiat's auto unit under its wing could be a problem for GM, which is already grappling with woes at its Opel unit in Europe. The Detroit-based company could find itself with a nearly identical and equally unprofitable carmaker in the same weak market.