TURIN - When Chairman Paolo Fresco vowed a year ago to increase shareholder value at Fiat SpA he probably didn't mean to do it with rumors that Fiat Auto would be sold.
But it is rumors that cause Fiat's share price to move these days. Nothing else has worked, including the launch of a new Fiat Punto and Lancia Lybra last year.
Fiat shares jumped nearly 5 percent early on January 27 after press reports that it was close to a merger with DaimlerChrysler.
It turns out that investors were reacting to news that D/C co-chairman Bob Eaton planned to retire. Speculation is that Eaton had opposed a deal with Fiat and that his retirement freed Jurgen Schrempp to make a deal with Fiat or another carmaker.
For good measure, there were also rumors that Italian scrapping incentives would be brought back. But by the end of the trading day the shares drifted back down, finishing 2.9 percent over the previous day at A29.02.
Rumors linking Fiat with other auto giants, including D/C, Ford and General Motors, surface regularly. Fiat shares tend to surge on the reports, then drop back down again when the rumors prove unfounded.
But investors are watching the situation in Turin closely. Indeed, the latest rumors are that a memorandum of understanding with an unnamed automaker has already been signed - and will be announced in March. Fiat says it will not comment on rumors.
The company's shares have spent most of January in a free-fall, reflecting the overall decline of the Italian stock exchange during the month after a big build-up in late December.
Fiat's price on the Milan exchange peaked in April 1998, at 45.03. But by September of that year it had fallen to 20.89.
The rumors cause huge differences in the quantity of Fiat shares traded daily - ranging this month alone from a half million shares on quiet days to over 3 million on hot days. About 2.8 million shares were traded on January 27, compared to 1.7 million the day before.
Fiat's low stock price contributes to its attractiveness to potential bidders. But the company would probably like to boost its attractiveness in other ways. Fiat will announce financial results in February 18 and fourth quarter results are expected to be far better than in 1998.
The company says sales of the new Punto are strong. Production is running at the planned daily rate of 2,800. Indeed, supplier sources say they received an increase in orders for Punto components late last year. But there are also rumors - again with the rumors - that Fiat is aggressively pushing sales of the new car with its dealers.
Luca Ciferri and Reuters News Service