Automotive Industry watchers were awaiting the implementation of the `put' between General Motors (GM) and Fiat. But the issue got delayed as GM had second thoughts on the agreement. This article takes a look at the problem with details on the background, reasons of both companies for entering into the agreement and the final resolution of the matter.
The concept of synergy was initially introduced as a management tool to help businesses grow by either merging companies together or by consolidating marketing efforts and financial inputs on select product lines for mutual gain. This philosophy was extended further by GM and Fiat when they decided on the "put option" in their agreement. The option gave Fiat the chance to sell its auto business to GM. The "put" was the result of the 2000 agreement between the two companies, which gave GM 20% share of Fiat Auto.
General Motors was founded on September 16,1908 by William Durant. Over the next quarter century or so a number of big names like Pontiac, Cadilac, Reliance, Rapid and Chevrolet became a part of this growing entity. GM launched its first vehicle outside the US and Canada in 1924 at Copenhagen. By the turn of the last century GM was the leading car manufacturer with operating plants in Europe, Australia, South America and Southeast Asia.
The two companies had agreed to a one-year period to settle all issues but were unable to come to an understanding. A major option considered was for GM to pay Fiat to come out of the "put" and be released of all obligations. One line of thinking was to set up another company as new Fiat Auto, which would have GM, Fiat, Fiat's creditor banks and, indirectly, the Italian government as shareholders, with GM likely to have 25 to 40% stake in the company. |
