FIAT may merge Alfa with Ferrari

[GLewis4457@domain.elided]

I found this in the AOL Business section...

Fiat sees better Q2 for cars, brand row goes on

By Stefano Rebaudo and Paolo Biondi

TURIN/ROME, July 11 (Reuters) - Fiat <FIA.MI> said on Thursday results at its 
core but loss-making car division should be better in the second quarter than 
the dismal first and tried to scotch talk the unit's marques could be broken 
up.

But a top lawmaker said a plan to split Alfa Romeo away from Fiat Auto and 
into Fiat's sports car unit Ferrari, and then sell the rest of the core car 
division, was "the only way forward."

Fiat Auto made an operating loss of 429 million euros ($423.5 million) in the 
first quarter, dragging the group to a net loss of 529 million euros and 
forcing it to run to banks, including erstwhile enemy Mediobanca <MDNI.MI>, 
for help.

"The second quarter will be better than the first. How much better remains to 
be seen," Giancarlo Boscetti, Fiat Auto's chief executive, said at a meeting 
of Italian auto body Anfia.

In a bid to raise money, Fiat sold 34 percent of Ferrari to a Mediobanca-led 
group last month, saving it from listing its crown jewels on a shaky market.

On Thursday one of Fiat's creditor banks Sanpaolo <SPI.MI> said it was 
considering buying part of Mediobanca's stake in Ferrari.

Sources say Mediobanca wants to add Alfa Romeo to the stable that houses 
Ferrari and Maserati.

Such a plan would likely incur the wrath of U.S. giant General Motors Corp. <<A HREF="aol://4785:GM">
GM.N</A>> which bought 20 percent of Fiat Auto -- made up of Alfa Romeo, Lancia 
and Fiat -- in 2000, giving Fiat a "put" option to sell the rest from 2004.

Fiat Chairman Paolo Fresco scotched the idea of splitting the brands, saying: 
"There is no such plan either in Ferrari or in Fiat Auto."

But a senior lawmaker later said that might be the only option and suggested 
Fiat, which also has interests ranging from energy to insurance, should try 
to win GM around to the idea.

"At this point Fiat should renegotiate its agreement with GM on the Alfa 
marque," said Bruno Tabacci, the head of the lower house industry commission 
which is studying a crisis rocking Italy's car sector and sucking on Fiat's 
revenues.

Sanpaolo said on Thursday that it and fellow creditor banks had extended the 
deadline for Fiat to cut its net debt to 3 billion euros ($2.96 billion) to 
the date 2002 results will be approved.

Full year results are usually approved in May, while Fiat originally set a 
debt deadline of the end of 2002.

Italy's car market shrank an annual 13.4 percent in the first half of 2002, 
with Fiat sales outstripping the fall. In a bid to revive the market, the 
government has introduced tax breaks on environmentally friendly vehicles.

"We know what the market situation is and we hope the environmental 
incentives will have an effect," Fiat Auto's Boschetti said, adding a 
restructuring plan that includes a shake-up of its dealer network would not 
be felt until 2005.

GOOD PLAN

Italian Prime Minister Silvio Berlusconi said he had seen Fiat's recovery 
plan which "seems well done" and added his voice to a chorus of concern that 
a sale to GM would weaken Italy's historic carmaking industry.

"Nobody wants the sector to be led by a group that is not Italian or present 
in Italy," the billionaire businessman said.

Tabacci said splitting the brands up and adding Alfa Romeo to Ferrari's 
stable was "the only way of ensuring an Italian way out of the Fiat crisis."

Fiat's Fresco said the group's decision makers would remain Italian "in 
whatever circumstance," adding that Berlusconi's concern for Italy's role in 
cars "rang true" with Fiat's plans.

As Fiat's finances are bashed by slowing car markets in which its share is 
shrinking, speculation has grown that the maker of the old iconic Cinquecento 
will take up the GM option.

Earlier this month, Fresco said Fiat was committed to turning around Fiat 
Auto but added: "The highest probability is that it will become a stronger 
member of this GM federation."

On Thursday, Fresco said Fiat wanted to "deepen our collaboration" with GM, 
which also owns European marques Opel, Saab and Vauxhall. He did not 
elaborate.

Fiat and GM have a range of joint ventures including powertrain and 
transmission production and small car parts.
   
07/11/02 15:25 ET
    
Jerry in Houston
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