Fiat needs 5-7B euros to gain GM Europe

Marchionne met with senior government officials in Berlin on Monday to present his ambitious vision of combining Fiat's car business with General Motors' European operations and Chrysler.

Marchionne's plan would involve spinning off Fiat's core car business into a new company including Chrysler and GM's Opel, Vauxhall and Saab brands.

It is an interesting approach, without question, Economy Minister Karl-Theodor zu Guttenberg told reporters after meeting Marchionne.

He said the German government, which is keen to save jobs at GM's Opel unit ahead of a September election, would look at the details of the plan and also consider other options.

All Opel's final assembly plants in Germany would be safe under Marchionne's plan, said Guttenberg, but an engines and parts factory in Kaiserslautern, in western Germany, may be hit.

Opel employs about 25,000 people in Germany and also has plants in Spain, Belgium and Britain.

Guttenberg said Fiat was not planning on taking on new debt but that it would require some 5-7 billion euros in bridge-financing and was seeking state guarantees from around Europe. Previously, Opel had said it required 3.3 billion euros ($4.37 billion) in state guarantees.

If Marchionne's plan is realized, the combined group would be the world's second-biggest automaker with sales of about 6-7 million vehicles a year.

A Fiat statement on Sunday said Fiat, Chrysler and GM Europe would together have annual revenues of about 80 billion euros ($106.3 billion).
Marchionne told the Financial Times that Fiat and GM Europe would reap synergies of 1 billion euros a year.

He has argued that a carmaker must make more than 5 million vehicles a year to be able to turn a profit and said last year Fiat lacked the scale needed to survive the sector crisis alone.

However, analysts said planned job cuts could be a stumbling block to a deal.

The big hurdle we can see is social cost, said Michael Tyndall, of Nomura International. I'm not sure if the Italian or German governments have the appetite for the job losses a merger would entail, he said.

Opel labor leader Klaus Franz also sounded a cautious note.

We will not be hostile to anyone but we will undertake a very careful risk analysis, he told reporters at Opel's Eisenach plant in German, adding he wanted to be sure that any partner was interested in a long-term investment.
Guttenberg said GM in Detroit would have to take a view on the proposed deal and he noted the German government was also looking at other options.

Austrian-Canadian car parts maker Magna is interested in Opel and there are other possible investors, possibly including sovereign wealth funds.