Disposal of the 51 per cent stake in the financing and leasing unit will cut Fiat's total debt - an estimated £21bn - by £5bn. But Umberto Agnelli, a member of Fiat's controlling Agnelli family, says if the group fails to perform it could be sold. “Fiat must feel that it can give the greatest possible guarantees for development to all the people who work in Fiat Auto. If it feels that way, we as shareholders will be happy. If it doesn't, the consequent decisions must be taken,” says Agnelli.
The company sold a 20 per cent stake in its Fiat Auto automotive division to General Motors two years ago and has an option to sell the remaining 80 per cent to the US car giant in 2004. The news comes as Italian officials bid to help the ailing car giant by offering Fiat controversial tax breaks.
Italian Prime Minister Silvio Berlusconi wants to create a state-funded scrapping incentive - effectively a government-funded price cut where consumers are given vouchers that can be redeemed when old cars are traded in. Berlusconi says the whole Italian motor industry will benefit from a scrapping scheme, not just Fiat. However, with a 25 per cent share of the Italian car market, Fiat has the most to gain.
But critics of scrappage schemes say that while manufacturers gain from short-term volume increases, they only bring forward existing purchases and fail to create much-needed new business.