Marchionne proposed pan-European combination of Fiat, Opel, PSA, sources say
 | Sergio Marchionne is looking for a European partner to break Fiat out of its isolation in the slumping region after GM and PSA formed an alliance earlier this year. |
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NEW YORK (Bloomberg) -- Fiat CEO Sergio Marchionne approached PSA/Peugeot-Citroen and General Motors earlier this month about a pan-European combination that would leapfrog Volkswagen as the region's largest automaker, three people familiar with the matter said.
Marchionne proposed that PSA commit to a combination between Fiat, the French carmaker and GM's European Opel unit in exchange for stock in the new entity, said the people, who asked not to be named as the proposal was private.
The CEO also offered to take Opel as part of the deal if he got $5 billion to $7 billion to restructure the unit, two of the people said.
The Fiat CEO is looking for a European partner to break the Italian automaker out of its isolation in the slumping region after GM and PSA formed an alliance earlier this year.
Complicating any deal with PSA is the automaker's acceptance last week of 7 billion euros ($9.1 billion) in bond guarantees from the French government, which will require the company to put labor and government representatives on its board.
A combination would have given the new entity more heft to compete with Volkswagen as the industry weathers the sovereign-debt crisis.
Together, Fiat, PSA and Opel account for 25 percent of the region's auto sales, topping VW's 24.8 percent share.
The three have struggled to reverse shrinking European sales as the crisis pummels consumer confidence. Vehicle deliveries in the region in 2012 may plunge by the most in 19 years, according to the ACEA manufacturers' trade group.
GM focus
Marchionne's proposals never got to the negotiating stage because PSA favors its plans to ally with GM on purchasing and development projects, the people said.
PSA also wants to restructure its workforce before engaging in talks for a broader alliance, one of the people said.
Fiat, GM and PSA representatives all declined to comment.
Marchionne approached GM CEO Dan Akerson, GM Vice Chairman Steve Girsky, PSA management and members of the Peugeot family, which owns about 25 percent of the company, the people said.
In conversations with PSA, Marchionne has argued that the parties can create a Europe-focused company without any interference from American managers, one of the people said.
Marchionne, who unsuccessfully bid to buy Opel when GM was considering selling the unit in 2009, said Oct. 10 in an interview in Brussels that questions on possible interest in Opel and PSA had been "asked and answered a number of times" and he didn't "want to go through it" again.
PSA hesitation
PSA is hesitant to partner with Fiat, which would increase exposure to Italy, Spain and France, while providing little advanced technology, two of the people said.
The GM deal is preferable because of the U.S. automaker's large global presence, the people said.
GM has racked up $16.8 billion in losses since 1999 in Europe, including $361 million in the second quarter. The company reports third-quarter results on Wednesday. PSA also has struggled, reporting an 819 million euro net loss in the first half.
The carmaker said in July that it planned to cut 8,000 jobs and close a factory near Paris.
Marchionne has sought talks with PSA and GM for months, two of the people said.
The 60-year-old executive, who has run the Italian automaker since 2004, is pursuing consolidation to help shield Turin-based Fiat from Europe's declining fortunes, the people said.
Fiat today forecast a prolonged downturn in the European market after reporting a wider loss in the region. The third-quarter operating loss in Europe grew 61 percent to 219 million euros.
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