Luca Ciferri is Automotive News Europe's Italian correspondent. Here he analyzes the options facing Fiat Auto in an industry increasingly dominated by global giants.
TURIN - In Italy, it seems everyone has a theory about what will happen to Fiat Auto. Potential buyers or merger partners for Fiat SpA's money-losing car division keep surfacing. The list now includes Ford, General Motors, Toyota, Mitsubishi and DaimlerChrysler.
Some say it is by no means certain that Fiat Auto will be sold or merged. Chairman Paolo Cantarella said the carmaker can grow by itself. But Fiat Group Chairman Paolo Fresco sounded less certain: 'Fiat Auto has to get stronger before entering a possible alliance,' he said.
The Agnelli family, which controls 30 percent of voting shares, acknowledges the likelihood that Fiat's future will be as part of a larger group.
'Fiat Auto can go it alone, but it is destined to find some form of alliance,' said honorary Chairman Gianni Agnelli. 'But what type of alliance - and when - I don't know.'
His younger brother Umberto recently gave another view of the future. 'At a certain moment in time,' he said, 'the best agreement could be with someone much bigger than you. At that point, you would become shareholder of a bigger and stronger group.'
Fresco and Cantarella share a philosophy that suggests that an alliance is inevitable. They believe that every operating sector of the group should be a global leader in its field.
To that end, Fiat has spent over $5 billion this year to become the world's largest machine tool and agricultural equipment manufacturer.
It bought machine-tool maker Progressive Tools and Industries Co. and merged it with its Comau unit. Fiat also bought Case, the US farm equipment conglomerate, and joined it with New Holland, its London-based agricultural tractor and construction equipment division.
But in its core vehicle business, Fiat is still far from the top rank. Fiat Auto is the world's sixth largest carmaker and Iveco the ninth largest heavy-truck maker.
These businesses could get bigger through acquisition. Fresco has said Fiat can raise $10 billion to finance another deal, but admits 'it is more difficult to find good opportunities than the funds to finance them.'
Early this year Fiat Group offered $13.5 billion to buy AB Volvo, a move that would have strengthened both Fiat Auto and Iveco.
But Volvo decided to sell just its car unit to Ford, for $6.45 billion. The remaining Volvo truck business last week tied up with Scania, ending speculation that it would be bought by Fiat or Volkswagen.
An alliance with a stronger or similar-sized partner seems the only way to quickly become a major world player. The opportunities are out there.
'We wanted to buy Fiat Auto,' said DaimlerChrysler executive Jurgen Hubbert last month. 'But the Agnellis definitely do not want to sell at the moment.' Fiat refused to comment on Hubbert's remarks, but DaimerChrysler could be what Umberto Agnelli had in mind when he talked of becoming a 'shareholder of a bigger and stronger group.'
For now the Agnellis do not want to be viewed as the sellers of Fiat Auto.
Meanwhile, another door has opened. Fiat and Ford negotiated to a stalemate in the 1980s, but they have begun talking again. This time there is a third player who could help make a Fiat-Ford marriage a reality - the US industrial conglomerate General Electric.
The previous talks collapsed in October 1985, mainly because the partners could not decide which would own 51 percent of the new company.
Now they might get around that obstacle by having General Electric as a third shareholder, with GE's legendary chairman Jack Welch as the group's referee. Fiat SpA and Ford Motor Co. would each own 40 percent and General Electric the remaining 20 percent, according to one theory making the rounds here in Turin.
Welch, who is set to retire from GE next year, was named to Fiat's board of directors on 23 June. Those who know the 'shareholder value' guru say he didn't join the board just because of his friendship with Paolo Fresco, his top lieutenant at GE before Fresco moved to Fiat in July 1998.
'Welch turns down dozens of board offers a day,' said one GE insider. 'If he decided to take a position so far away from the US, it means there is something more, both for him and for GE.'
How would the deal be structured? According to one theory, Fiat would offer up its auto division, Magneti Marelli, and maybe also the combined Comau/PICO operation.
Ford would contribute Ford of Europe and Visteon, which it already plans to spin off.
Fiat would run Visteon-Magneti Marelli, making the second largest auto supplier in the world behind Delphi, and well ahead of the current No. 2, Robert Bosch GmbH. Ford would manage the combined automotive operations. After a few years, GE's 20 percent could be floated.
Meanwhile, Toyota lingers in the background. The Japanese company made its first offer to buy Fiat Auto in 1987.
The Agnellis said 'no thanks' at that time, but the two companies never stopped talking. There have even been some small joint ventures of their components arms, Denso and Magneti Marelli. There are some Fiat watchers in Italy who say that Toyota could really be the one to watch. Stay tuned.