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FIAT Pulls Out of GM Europe Deal

Fri, 29 May 2009
It was announced this afternoon that FIAT has pulled out of financing talks for Opel/Vauxhall.

What has now happened is an Eleventh-hour deal with Magna to secure finance for the embattled European arm and this confirms the need for European-level bankruptcy procedure-

It is reported that General Motors and Magna have reached an agreement to provide 1.5bn ($2.1bn) worth of emergency financing to save Opel – the GM owned carmaker – from insolvency. This follows hot on the heels of Fiat pulling out of financing talks earlier today, and in the wake of heated discussions between Berlin and Washington after the revelation that a shock $415m was required to keep the European business afloat.

Dr. Rainer Nitsche, Managing Director of ESMT Competition Analysis, the Competition arm of the Berlin-based international business school, comments:

“The handling of negotiations only confirms the need for a pan-European bankruptcy procedure to match that of the US, to take the politics out of the negotiating room. The web of bankruptcy frameworks currently in place on national lines is no longer fit for purpose. While these are intended to enable the workable rehabilitation of a distressed company, overall these do not give the level of support of Chapter 11, nor do they take account of the emergence of global businesses which require more cohesive support.

“Until this is changed, the stigma of bankruptcy and fear of insolvency will lead to politicised, protectionist action on the part of European governments, making it difficult to judge the effective and rightful deployment of state aid. The extent of the positive assurances we have seen from Europe’s nations in fighting for their national champions, has left them little room to manoeuvre even before discussion talks had begun. European governments needed to keep their cards close to their chest. Instead, the Ace of Spades was handed to Washington long before they even reached the bargaining table.”

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