Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

Fiat and GM : The Troubled Alliance

Abstract:
The auto division of the Italian conglomerate, Fiat has been incurring losses since the mid-1990s. Fiat's attempt to save its ailing auto division resulted in a strategic alliance with General Motors Corp. (GM) in 2000 under which GM obtained 20% stake in Fiat Auto while Fiat obtained 5.1% in GM. Fiat also enjoyed a put option in which it had the right to sell the remaining stake to GM after four years. However, as Fiat's losses increased in 2003 and the company sought a recapitalisation, GM's stake in Fiat was reduced to 10% as it refused to be a part of the recapitalisation process. In 2004, with GM's refusal to buy the remaining 90% stake in Fiat auto under Fiat's put option, the alliance turned hostile.

Pedagogical Objectives:

• To discuss the reasons for the break-up of the Fiat-GM strategic alliance
• To discuss the future of strategic alliances in the global automobile industry.

Keywords : Fiat Group;Mergers, Acquisitions, Alliances Case Study; General Motors (GM); Fiat Auto's losses; Fiat's restructuring plan; Fiat's strategic alliance with GM; Fiat's put option; GM's Europe operations; GM's strategy for alliances; Powertrain; European car market