Strategic Alliances, Collaboration and Joint Ventures Case Study

Breaking Alliance With Fiat : Gain for GM?

OR

Abstract:
n 2000, General Motors’ (GM) rival, DaimlerChrysler, was planning to takeover Fiat. To keep its rival at bay, GM entered into an alliance with Fiat. The agreement included a put option clause for Fiat that could force GM to buy out Fiat, irrespective of GM's interests, any time between 2004 and 2009. In January 2005, when Fiat wanted to exercise its put option, GM refused to buy Fiat. Under such circumstances, the alliance was broken and GM had to pay Fiat $2 billion as an exit fee.

Pedagogical Objectives:

• To discuss the benefits that GM derived out of the episode that cost the company a total of $4 billion – initial investment plus the price to pull itself out of the put option.

Keywords : Fiat;Mergers,Acquisitions,Alliances Case Study; General Motors (GM); Put option; GM in Europe; Ford Motor Company; DaimlerChrysler merger; Global alliances; Mergers and acquisitions; Synergies in alliances; Breaking-up of alliances; Global automotive industry

Contents : 
GM’S ALLIANCEWITH FIAT IN EUROPE
BREAK-UP OF THE ALLIANCE AND GAINS FOR GM
Decreasing Market Share of Fiat in Europe
Significant Aspects of Settlement between GM and Fiat
Time Line of Fiat and GM Alliance