ANOTHER ALLIANCE …
… caused a lot of noise in automobile circles. The first and seventh largest companies in the world merged: General Motors and FIAT.
The fact that the Turin giant is going through hard times has been talked lately more and more insistently. The monopolist, always supporting any Italian government and invariably supported by them, began to lose ground with the unification of Europe. It was not easy for the state to pursue a protectionist policy, the financial system of Italy, which is part of the pan-European market, became less stable - and this affected the position of the FIAT. Despite the fact that the company's annual turnover has grown steadily over the past five years (see table), it has become increasingly difficult to compete with dynamic European and recently emerging transnational automotive supergiants. Therefore, the question of consolidation with one of the major automakers inevitably arose.
And now - it happened. In mid-March, shortly after the resignation of the president of the Italian concern Giovanni Agnelli and the arrival of Paolo Cantarella instead, the deal took place: FIAT entered into an alliance with General Motors. The world's largest multinational company acquired a 20% stake in FIAT for $ 2.4 billion, in exchange providing 5.1% of its own shares.
Both firms hope that the union will be fruitful. It will help in five years to reduce production costs by $ 2 billion - such savings will come from the joint development of engines, transmissions, bulk wholesale purchases of components for automobile production, and a rational approach to sales and service. At the same time, according to company management, their brands will continue to compete in the markets of Europe and Latin America. It was specially emphasized that staff cuts (and about 234 thousand people work there) and production at FIAT are not expected.
Nevertheless, the alliance of the two companies caused a panic in the stock market. At the end of March, the shares of the Italian automaker fell catastrophically - almost 11% in one day! Despite the fact that usually the association of large firms causes an increase in the value of their securities, since it indicates an increase in their stability. Maybe the fact is that FIAT announced the termination of dividend payments - this happens when companies are restructuring or investing in new production facilities. But recently, the Turin company has not paid them to its shareholders.
Most likely, the decline in the FIAT securities exchange rate was caused by the announcement of the figures appearing in the transaction. The Italian company appeared to be one of the least profitable in the industry: the price of one share is 28 (!) Times higher than the annual profit that it will have (this means that you need to invest $ 28 in the purchase of securities in order to “earn” everything 1 dollar). Despite the fact that in Daimler-Chrysler, for example, this ratio is 9: 1! It turns out that the acquisition of FIAT shares is equivalent to placing money in a bank at 3.6% per annum, which is very unprofitable by the standards of the current stock market.