Fiat-GM Talks End in Stalemate

Fiat and General Motors have failed to settle a row over whether the Italian group can force GM to buy its ailing car unit, sending Fiat shares spinning lower.

Fiat said it could exercise the contested put option from Wednesday but the fact it did not pull the trigger nor win a deal disappointed investors who had hoped GM would pay Fiat about 1.8 billion euros (1.3 billion pounds) to drop the option.

A mediation period to settle the issue ended at midnight in stalemate and now the companies can go to court.

Fiat shares opened down 5.1 percent at 5.88 euros, erasing much of the 7 percent gain the truck-to-robotics group had made over the last month on hopes of a deal with GM. In early trade Fiat was down 4.3 percent at 5.93 euros.

"There is enormous disappointment out here. There's now the risk of an infinite litigation," said a Milan-based trader.

Shares in Ifil, the Agnelli family holding company which owns about a third of Fiat, traded 3 percent lower.

Fiat and GM dug into their positions over the put option on Wednesday with GM reiterating that Fiat had invalidated the option by changing Fiat Auto in a recapitalisation which halved GM's stake in the unit to 10 percent, and by selling its finance arm.

"Our position hasn't changed since these transactions took place. We have not moved one iota," a GM spokesman said.

Fiat continued to reject that.

"Fiat reasserts its view that the put option is valid, enforceable in accordance with its terms and an important asset for the group. The put is exercisable from today," Fiat said.

In the past, Fiat Chief Executive Sergio Marchionne has said he could exercise the option to force a quick valuation of Fiat Auto and squeeze a settlement out of GM, not necessarily as a prelude to a sale.

Fiat declined to comment on when Marchionne might push the button.

Little Time

Analysts have said Fiat has little time on its side as Fiat Auto is burning cash, its sales are still down and it is loaded with about 8 billion euros of debt.

GM is loath to take on Fiat Auto as it struggles to revive its own European business, which has made losses in each of the last five years, and as it grapples with high U.S. healthcare costs.

"All of our options are still available to us -- that has not changed -- and we will pursue those options at the appropriate time," the GM spokesman said. But he added that he had "no idea" if the issue would end up in court.

GM agreed to the put in 2000 when it bought 20 percent of Fiat Auto and set up cost-saving joint ventures with the 106-year-old carmaker. DaimlerChrysler had wanted to buy 100 percent of Fiat Auto but patriarch Gianni Agnelli, who died in 2003, was unwilling to cede control immediately.