http://news.ft.com/cms/s/fba06384-6d...0779e2340.html
Fiat eclipses GM in value
By James Mackintosh
Published: December 15 2005 02:00 | Last updated: December 15 2005 02:00
The market value of Italy's Fiat, long regarded as the basket case of the European motor industry, has passed General Motors, the world's biggest carmaker by number of vehicles sold, for the first time on record.
The shift demonstrates both the scale of the crisis at GM and the rapid return of investor confidence in Fiat. Just two-and-a-half years ago GM was worth more than seven times as much as Fiat and was expected to buy the Italian company's carmaking division. But Fiat is now worth €10.7bn, or $12.87bn, against GM's $12.67bn.
GM continues to be far bigger than Fiat in operating terms, employing 325,000 people and making 8.2m cars and trucks last year, against Fiat's 160,549 workers and 1.77m vehicles.
"The US automotive business model has continued to frighten investors while Fiat has managed to show significant operational improvement and also massivelybolstered its balance sheet," said John Lawson, motor analyst at Citigroup. "Ironically that's partly come from GM."
The fortunes of the two companies were closely tied until February, when GM paid Fiat €1.55bn to avoid having to buy Fiat Auto, and surrendered its 10 per cent stake in the lossmaking car division. It gained half a factory in Poland and access to some advanced diesel engines in return.
Since then, GM has racked up billions of dollars of losses as sales of its most profitable vehicles - large US offroaders - collapsed and healthcare costs spiralled. It has also had its credit rating downgraded to junk bond status, with Standard & Poor's, the rating agency, this week putting it below Fiat's rating for the first time. S&P also warned that GM could be forced to default on its debt or file for bankruptcy if its performance did not improve.
By contrast, Fiat is set to make its first profit for several years this year, helped by the conversion of a large chunk of its debt to equity and the payment from GM. The company also expects to meet its target for reducing losses at Fiat Auto to €320m, and is considering tapping the bond markets.
GM and Fiat declined to comment
16th December 2005, 12:08
