Fiat-GM alliance is paying off

Fiat Auto's alliance with General Motors is paying greater dividends than expected. The partners already have launched joint purchasing, and they have plans to share powertrains and platforms.

Together, the two companies expect to cut purchasing costs by $1.2 billion in 2005. The powertrain alliance should prove equally useful. Adam Opel AG - which is struggling to produce enough diesel engines to satisfy European consumers - will use diesel engines developed by Fiat. Meanwhile, Fiat will use Opel's four- and six-cylinder gasoline engines.

By 2007, the companies expect to use eight families of gasoline engines, down from 14 today. Likewise, the two companies expect to use three families of diesel engines, down from six today. Over the next six years, their merged powertrain operations is expected to save $1.4 billion.

Next, the companies will share platforms. Fiat and General Motors are studying proposals to develop a joint platform for the Fiat Punto, Fiat Palio, Opel Corsa and Opel Agila. The next-generation versions of those cars will appear in 2005 and 2006.

Another project involves the Premium platform, which could provide the mechanicals for Alfa Romeo, Lancia, Saab and some Cadillacs. The platform will be used for the next Alfa Romeo Spider - due in 2004 - as well as the next-generation Alfa Romeo 156 and 166. Lancia will use the Premium platform for the next Lybra, plus a model to replace the discontinued Delta.

Fiat and General Motors have formed a team in Gothenburg, Sweden, to work on the Premium platform. The team leader is Paolo Sandri, formerly Fiat's components platform director.

Fiat and General Motors appear determined to make their alliance work. But a key question remains: Will General Motors eventually buy the Italian automaker? The Agnelli family has the option to sell its 31 percent holdings in Fiat to General Motors. But it is not at all clear what the family will do when its elder statesman, Giovanni Agnelli, dies.

Historically, GM has been content to own minority shares of such automotive partners as Subaru, Suzuki and Isuzu. General Motors did buy a controlling share of Swedish automaker Saab, but only after it became clear that Saab needed stronger direction.

Our prediction? The two automakers will be content to remain separate as their joint ventures in purchasing, powertrains and platforms yield savings.

You can reach David Sedgwick at dsedgwick@crain.com

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