TURIN, Italy - Fiat S.p.A. is flirting with potential buyers of its auto division.
Speculation of a deal with DaimlerChrysler has intensified. Meanwhile, some sources say Ford Motor Co. may have eclipsed DaimlerChrysler as the most likely partner.
The speculation has sent Fiat S.p.A. stock on a wild ride. Its shares have soared on rumors of an imminent deal and fallen when the rumors were denied. Takeover speculation in the first half of February pushed the stock to a 12-month high.
A usually tight-lipped confidant of the Agnelli family that controls Fiat gave the first indication of the timing for a possible car alliance, saying it should be decided this year.
'Fiat is actively being courted,' lawyer Franzo Grande Stevens told reporters. 'I think that by the end of this year it must decide whether to go for an alliance, and with whom.'
Grande Stevens is on the boards of Agnelli holding companies IFI and IFIL, which control Fiat.
Fiat Honorary Chairman Gianni Agnelli, speaking to Fiat Auto executives earlier this month, repeated the official line that the carmaker 'can go it alone.' He added: 'An alliance is neither an obligation nor a necessity.'
But he said the group would not let good opportunities pass it by.
'We have many options,' said one high-ranking Fiat executive. However, he said no deal was imminent.
Uncertainty remains about whether it would be an outright sale of Fiat Auto or a joint venture. But one thing is clear. Fiat Group these days would come cheaper than ever. When Fiat bid to take over AB Volvo a year ago, its market capitalization was close to 25 trillion lira, at that time equivalent to $15 billion.
The group's value in dollars is now less than $11.5 billion. Fiat Auto, not publicly listed and 100 percent owned by Fiat S.p.A., accounts for half of group revenues.
Fiat has more to offer than a bargain price. It would give DaimlerChrysler the small-car base it desperately is seeking and would give DaimlerChrysler and Ford a strong base in southern Europe.
It also has a rapidly expanding presence in emerging markets through its Palio world-car program.
TIME MAY BE RIGHT
An attempt to merge Fiat Auto and Ford of Europe in 1985 collapsed because both sides wanted to control 51 percent of the combined company. But the time may be right to sell Fiat.
From 1993 to 1999, Fiat Auto suffered a combined loss of euros 888 million, equal to $872 million at last week's exchange rate. Fiat Group Chairman Paolo Fresco will have a hard time living up to his promise to increase shareholder value when the subsidiary that accounts for half of group revenue remains unprofitable.
Even the outlook for 2000 is not promising - no more than breakeven.
But the future is in the hands of the family that controls Fiat. For patriarch Giovanni Agnelli, who turns 79 next month, the auto division is the flagship of the empire. Most believe that Fiat's honorary chairman would not agree to a Fiat Group without autos.
But his younger brother Umberto, 66, active in the IFI and IFIL family holdings, is more pragmatic, sources say. In 1976 he left the helm of Fiat to become a senator for the Christian Democratic Party. In 1993 he also left his Fiat Group board chairmanship to his son, Giovanni Alberto, the heir apparent of the Fiat empire. Giovanni Alberto died in 1997.
Umberto and his family no longer have direct links with Fiat S.p.A. and Fiat Auto. Company sources say they are much more open-minded about exiting from sectors that only offer a modest return on sales.
The extended Agnelli family, which now includes more than 100, is hungry for dividends. Many members would not mind giving up Fiat Auto if it meant more stable returns.
But some analysts cautioned against speculating about possible Fiat matches.
Garel Rhys, director of the Center for Automotive Industry Research at Cardiff Business School in Wales, said: 'People simply don't understand the position of Fiat Auto within the attitude of the Agnelli family.
'Fiat Auto is inscribed on their hearts. It is the last piece of the empire they would seek to get rid of, unless things are absolutely desperate.'
Of a possible DaimlerChrysler tie, he said: 'Buying into Fiat doesn't do much for DaimlerChrysler outside Europe. It doesn't take you into Japan or Korea. But it does get you into the Third World with the Palio approach.'
Automotive News Europe Staff Reporter Bradford Wernle and Reuters News Service contributed to this report