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Strategic Alliances, Collaboration and Joint Ventures Case Study

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Case Title:

Breaking Alliance With Fiat : Gain for GM?

Publication Year : 2005

Authors: G. Saradhi Kumar, Sumit Kumar Chaudhuri

Industry: Automobiles

Region:USA

Case Code: SCJ0006

Teaching Note: Not Available

Structured Assignment: Not Available

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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

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