GMSA's Kempston Road facility in Port Elizabeth.
Milan/Frankfurt - Fiat SpA plans to create an automotive empire spanning Europe, South America and Africa in a redrawing of the global industry as the market downturn hurts major players around the world.
The Italian carmaker aims to merge its car business with General Motors' European brands, Opel, Vauxhall and Saab, as well as its South American and South African operations, according to a copy of the proposal obtained by Reuters on Thursday.
Fiat, which presented the plan, dubbed Project Phoenix, to the German government on Monday, said in the proposal that it aimed to "ultimately remain as one of the 5 or 6 surviving entities in the global automotive market place".
Fiat is trying to survive the global economic downturn by building up its size rather than selling assets. If it manages to reach a deal with GM, it would create the world's second-largest automaker after Toyota.
The merger would come at the price of a few plant closures and downsizing of some factories. The slides showed estimated restructuring costs of up to 500 million euros ($666.1 million) to cut headcount in Europe.
GM Europe has said it needs to cut costs by $1.2 billion to return German brand Opel to profit by 2011. It has also said it needs 3.3 billion euros in state aid from European governments to avert job cuts and site closures.
Fiat plan not popular
Fiat's move has met opposition both in Germany and in its Italian home market. German labour unions favour a bid by Magna International, an Austrian-Canadian car parts manufacturer that has expressed interest in German unit Opel.
Fiat's proposal would help save a total of around 1.4 billion euros a year after 2015 and create 5.6 billion euros of net cash flow between 2009 and 2015.
The Fiat-GM talks - which began in earnest last week after Fiat sealed a deal to form a partnership with another struggling US carmaker, Chrysler LLC - have raised fears about plant closures and job losses across Europe to cut costs.
A source close to the situation told Reuters that GM could, as part of the deal, take a stake in the new entity created by the merger. The size of GM's stake would depend on which parts of its business would end up in the new company.
The New York Times said on its website that GM wanted at least 30% but Fiat was only willing to give up less than 10%.
Both Fiat and GM Europe declined to comment on the matter when contacted by Reuters.
GM burns through cash
GM's results on Thursday showed that it had burned through $10.2 billion in the first quarter, operating under a federal bailout. It posted a quarterly net loss of $6 billion, compared with a loss of $3.3 billion a year earlier.
Fiat vice chairman John Elkann told journalists at an event in St Gallen, Switzerland, that the aim of Fiat's plans was to create a strong car maker with long-term prospects.
"That's today what really matters," Elkann said.
Fiat has spoken of the possibility of spinning off the combined group and listing it on a stock exchange.