MILAN -- Fiat could seek compensation if General Motors does not accept an option allowing the Italian industrial group to force GM to buy out its carmaker, Chairman Umberto Agnelli said on Monday.
GM has argued that a "put" option allowing Fiat to foist its share of Fiat Auto on to the U.S. giant has been rendered void by steps the Italian firm has taken to pull the 104-year-old car unit out of its worst ever crisis.
On Sunday, GM and Fiat pushed back the start of the "put" option by a year to January 2005 and froze any legal action until the end of 2004 to give them time to sort out the spat.
"If they (GM) are determined not to accept the put, we need to work out if we can find some form of practical compensation," Umberto Agnelli told reporters on the sidelines of a conference.
GM declined to comment on Monday.
Analysts say it is in GM's favor to work out a new deal with Fiat to protect two joint ventures in parts buying and powertrain development which are saving much needed cash at its loss-mired European arm Opel.
"We now have a year's grace to discuss with GM those things they say could render the put invalid," Agnelli said, adding he would meet GM Chief Executive Rick Wagoner in Shanghai soon.
GM bought 20 percent of Fiat Auto in 2000 and since then, the maker of the Punto city car and Alfa Romeo Spider has tumbled deep into loss as sales of an old model line-up hit the brakes.
Fiat has shored up its core unit by selling assets, raising 1.8 billion euros in a capital increase and recapitalizing Fiat Auto by cancelling debts owed to other parts of its robotics-to-components empire.
GM argues the recapitalization -- which diluted its stake to 10 percent after it refused to stump up more cash -- and the sale of client financing arm Fidis broke the terms of the 2000 deal and released it from having to buy out Fiat Auto.
TIME IN HAND
Earlier on Monday, analysts said delaying the put option would give Fiat time to pull its car unit back to profit and strengthen its hand in any negotiations to become part of a bigger autos group, seen as an inevitable goal for Fiat.
"We knew Fiat wasn't keen to sell at a depressed price so they had to wait a few more quarters anyway," said Cyril Benayoun, an auto credit analyst at BNP Paribas. "The worst risk to Fiat and its ratings would be if the put was canceled."
Fiat managers have said they do not want to sell Fiat Auto and are focused on nursing it to operating breakeven by 2005.
On Monday, Agnelli left the door open for a sale further down the road. Asked if the put could be exercised, he said: "Certainly not in 2004 but then we need to talk to GM (about the put and possible compensation)".
The put option has been key to Fiat's valuation and was instrumental in persuading banks to give it a three billion-euro loan last year. Agnelli said its creditors had agreed to the 12-month delay on the put.
Fiat's decision not sell its car unit was one of the reasons all three major credit rating agencies cut Fiat's debt deep into "junk" or non-investment territory over the past year.
Standard & Poor's said the put delay did not alter its BB- rating on Fiat as it had not expected Fiat Auto to be sold soon. Fitch said Fiat intended to "use the put option in the context of a strengthening of cooperation (with GM) in the medium term".
Moody's analyst Falk Frey said Fiat was unlikely to exercise the put while it was working through the restructuring plan but said "we assume it remains a valid option".