TURIN, Italy - General Motors has walked away from its five years as Fiat Auto's powertrain partner with something it badly needed: a 1.3-liter common-rail diesel engine.
"Without this engine, GM would have completely missed out" on Europe's surge in demand for diesel-powered small cars, said Philippe Houchois, head of auto research at JPMorgan Chase in London.
In 2000, only 10 percent of GM sales in Europe were diesel-powered vehicles. By 2004, that figure had increased to 46 percent. About 60 percent of the 740,000 diesels GM expects to sell in Europe this year came from the powertrain joint venture with Fiat.
GM says that one-third of the 1.55 billion euros, or $1.91 billion at current rates, it paid Fiat to end their alliance covers:
The Fiat-GM divorce shakes up Europe's powertrain landscape: Fifteen of the partners' 16 engine and/or transmission factories in Europe revert to their original owners.
In February, Fiat and GM agreed to end their alliance.
The partners canceled the put option that allowed Fiat group to force GM to buy Fiat Auto. They also unwound powertrain and purchasing joint ventures, and GM returned its 10 percent stake in Fiat Auto to Fiat Group.
GM is turning its former Fiat-GM Powertrain assets into a new company called GM Powertrain Europe. Greg Deveson, who was CEO of Fiat-GM Powertrain, will head the unit.
GM Powertrain Europe is in Turin, Italy, home of Fiat's headquarters. It will be the company's diesel technology specialist.
GM also plans to open a global diesel development center in Turin this month.