Fiat Stake Sends GM Earnings Into Reverse

17 October 2002

General Motors is counting the cost of taking a stake in troubled Italian firm Fiat Auto, as the US giant’s third-quarter losses more than doubled.

The world’s largest car manufacturer bought a 20% holding in its Italian rival two years ago for $2.4 billion (€2.4bn; £1.5bn). That stake is now valued by GM at just $220 million (though Fiat claims this is too low).

Consequently, GM reported a $1.37bn third-quarter write-down on the stake, pushing the auto giant into the red to the tune of $804 million, far wider than the $368m net deficit posted in Q3 last year.

The loss comes in spite of a 30%-plus jump in earnings from auto sales and loans to $696m, plus a 2.6% increase in global revenues to $42.5bn. GM has benefited from strong US auto sales on the back of aggressive cost-cutting.

However, the car colossus also warned it will have to pay over $1bn next year to top up its pension fund, otherwise it could be fined. Such outlay may lead to redundancies.

Data sourced from: USA Today; additional content by WARC staff