Business Case Studies, Mergers, Acquisitions and Takeovers Case Study, General Motors & Fiat,Destination Splits Ville

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Mergers, Acquisitions and Takeovers Case Study

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Case Title:

General Motors & Fiat – Destination Splits Ville?

Publication Year : 2005

Authors: Hansa Iyengar, Jayasimha K.R.

Industry: Automobiles

Region:Europe

Case Code: MAA0058B

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
The latter half of the 1990s saw the share of companies like US based ‘General Motors Corp’ (GM) and Italian auto manufacturer ‘Fiat’ (Fiat), eroding in the European markets. While GM recorded losses of $403 million, Fiat saw their market share decline from 42.65% (in 1997) to 35.4% in 2000. Concerned about declining sales and eroding bottom lines, Fiat and GM entered into an agreement in early 2000, under which GM acquired a 20% stake in Fiat and Fiat purchased 6% of GM’s stock. But the rapid decline in Fiat’s sales and market share continued into the 2000s thereby resulting in huge losses. To control this decline, Fiat went in for a recapitalisation drive and sold off its more profitable businesses.

Pedagogical Objectives:

  • To discuss the merging of Fiat and GM
  • TO discuss the possible synergy that would arise from the deal
  • What GM and Fiat should do to stop the sales decline.

Keywords : Mergers,Acquisitions,Alliances Case Study;General Motors; Fiat Auto SpA; Put Option; GM-Fiat alliance; Fiat Restructuring; Gianni Agnelli; Opel; Fiat-GM Powert rain BV GM-Fiat Worldwide Purchasing BV; European Car Market; Automobiles; Alfa Romeo; Saab; Lanica; Fiat Group

Contents : 
The Partners
The Alliance and its Advantages
Estimated Synergy Savings
Trouble in Paradise
Arguing About the Future
Fiat Sales Performance
Fiat Operating Results
GM Financial Information

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