MILAN, Italy -- Fiat Chairman Paolo Fresco has told creditors that General Motors is unlikely to pump cash into Fiat Auto without scrapping an option that can force GM to buy the whole company, financial daily MF said Wednesday.
MF quoted a letter from Fresco to Fiat's top creditor banks as saying the two carmakers had discussed the possibility of GM increasing its 20 percent stake in Fiat Auto via a capital increase and expanding their current joint ventures.
"Doubtless a new agreement with GM would be most attractive (but) I am firmly convinced, after more than six months of talks, that such a deal will not be reached, at least in the near term, without us giving up the 'put' option," MF quoted Fresco as writing.
Earlier Wednesday, GM CEO Rick Wagoner said the next move was up to Fiat, adding he did not want to speculate on what would eventually happen.
GM bought 20 percent of Fiat Auto in 2000 and agreed to the "put" or sell option that allows Fiat to force the U.S. giant to buy the other 80 percent from 2004 -- an exit clause Fiat's creditors and other investors see as key for the industrial group's future.
"This will be a very difficult decision that will certainly be the main topic of discussion at our next meetings and at Fiat's board meeting," Fresco said.
Fiat managers are due to meet creditor banks on Feb. 14 while the board is slated to meet Feb. 28 to approve fourth quarter and preliminary 2002 results.
Fiat Auto is expected to have made a net loss of about $2 billion last year as sales continued to decline and the historic carmaker kept burning through cash.
Fiat Auto's losses have dragged the insurance-to-publishing group into the red, forcing it into the arms of banks that demanded Fiat halve its net debt and restructure its core business in return for a $3 billion convertible loan.
The banks, whose loan is roughly equal to the controlling stake the Agnelli family holds in Fiat, are looking at a plan to recapitalize Fiat Auto by about $5 billion -- possibly with help from GM -- and then spin off the carmaking arm.
But progress has been slow, and talks with GM have yielded no firm plan.
Fresco was quoted in the letter as saying the groups also were working on a scenario that would see them continue joint ventures in auto powertrains and parts purchasing that were set up in 2000.
Some media have reported that GM could raise its stake in Fiat Auto to 40 percent in return for $2 billion. Others have said GM is demanding to be given 100 percent of Fiat Auto's prestigious Alfa Romeo brand and its Brazilian operations.