Fiat aims to put its stamp on the global automotive industry

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In 1985, the Big Three accounted for 80 percent of the US market, but by January of this year, Detroit's market share was down to 43 percent. With the ongoing decline of American auto manufacturing, Asian firms have leapt ahead of the Big Three, with Toyota (TM) leading the way.

Now Fiat is jumping into the fray. The Italian automaker wants to create a global automotive empire, second only to Toyota, and it wants to do it with bits and pieces of the American car industry -- two of the Big Three.

Sergio Marchionne, Fiat's CEO, may reveal plans Monday to spin off Fiat's core cars division, joining it with Chrysler and General Motors (GM) Europe, and creating a new publicly traded European car company.


Fiat already helped bail out Chrysler from possible liquidation when it signed a partnership deal with the struggling Detroit automaker last week. The Chrysler deal still has to be approved by a U.S. bankruptcy court. Fiat wasted no time and turned to GM -- another struggling American automaker with a deadline from Washington to come up with a better restructuring plan by the end of the month -- or else. Marchionne is expected to meet senior German government officials in Berlin on Monday, according to reports.

Fiat said Sunday it is interested in a potential merger between Fiat and GM's European operations, including Opel and its U.K. unit Vauxhall, according to a statement issued by Fiat on Sunday, and maybe even Swedish unit Saab. It would then join Group Automobiles with GM's European operations and Fiat's stake in Chrysler to create a company with about €80 billion ($106 billion) of revenues and sales of six to seven million vehicles a year -- about the same as Volkswagen, and second only to Toyota worldwide.

Currently, Fiat produces 2.2 million cars a year, and Marchionne aims to produce at least 5.5 million cars a year to gain economies of scale. He told the Financial Timesregarding the Opel merger that, "From an engineering and industrial point of view, this is a marriage made in heaven." Marchionne sees the Opel and Chrysler deals as complementary, allowing Fiat to access to the U.S. auto market through Chrysler and a larger share in Europe through Opel. For now though, German Chancellor Angela Merkle may not be too happy about the possibility of Opel in Italian hands; the Germans might prefer a Canadian partner such as Magna International Inc., which has also been pursuing Opel.

Many believe this move marks the beginning of a wave of consolidation in the auto industry worldwide, as Marchionne himself claimed. But it's not as simple as that in the car industry, where national pride is so much part of the business and governments are involved to save both pride and jobs at car plants. Reports suggest that 8,000-9,000 jobs will be lost in Europe if the Fiat-Opel merger goes through.

In terms of brands, the car industry may be little changed in years to come, with companies simply merging or partnering up for better economies of scale. As for the U.S., though, if Chrysler makes a comeback -- by selling small Fiat cars disguised as Chrylers -- there may be two foreign automakers selling Americans most of their cars.
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