MAJORCA, Spain -- General Motors could still be forced to buy Fiat Auto even if a planned recapitalization reduces its stake in the loss-making Italian automaker, the head of GM said on Friday.
Fiat holds a "put" option that allows it to sell its 80 percent stake in its carmaking arm Fiat Auto to GM, the world's biggest carmaker, from next year. GM acquired 20 percent of Fiat Auto in 2000.
Last week, Fiat approved a recapitalization of up to five billion euros ($5.52 billion) for the holding that controls Fiat Auto and said it would stump up three billion euros immediately by cancelling inter-company loans.
If GM does not match that with 750 million euros, its 20 percent stake in Fiat Auto would be diluted.
Asked if a recapitalization would dilute GM's Fiat Auto holding, GM Chief Executive Rick Wagoner told Reuters: "All else being equal, it normally would -- you just have to do the maths".
Asked if the dilution would nullify the "put" option, Wagoner replied "No".
Top Fiat and GM managers have been in talks for weeks about the recapitalization but earlier this week Wagoner said the U.S. giant had not decided whether it would take part.
"There have been a zillion ideas tossed out and none of them have worked jointly," Wagoner told Reuters on a test-drive trip to the Spanish island of Majorca.
"What we have to do is jointly to come up with something that both of us think is better than the current set-up and if we don't, we just keep going with what we've got. There have been different ideas but I don't know if something is going to come out or not," he added.
Wagoner met Fiat's new Chairman Umberto Agnelli for lunch on Thursday and said their talks had not broken the stalemate.
He added that Fiat's attitude towards the recapitalization seemed to have changed after the group's debt was downgraded to "junk" status by two rating agencies this week and after top management changed last week.
Asked if the talks had brought the two sides closer, Wagoner said: "Not from our side. Most of the discussion was an update on the synergies (of our joint ventures)". GM and Fiat have joint ventures in purchasing parts and building powertrains.
On Thursday, Agnelli said he did not think Fiat would exercise its "put" option on Fiat Auto in the near term and hoped never to exercise it at all.
"I'll take it at face value from Umberto's comments yesterday that they're going to stay in the (car) business longer term and they've never told us that they didn't have that intention (to stay)," Wagoner said.