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Ford, Fiat Break Off Talks on Possible Combination

October 09, 1985|Associated Press

TURIN, Italy — Ford Motor Co. and Fiat S.p.A., Italy's largest auto maker, announced Tuesday that talks had broken off on combining the giant auto makers' European operations.

The two companies had been negotiating for about a year over a variety of possible combinations, from a joint company formed by Ford of Europe Inc. and Fiat to the joint production of automotive components.

The break-off in talks was announced in a statement issued by both companies. Ford said later in the United States that the two companies will "continue the possibility of other business arrangements," including the joint production of parts. However, Ford wouldn't elaborate.

Combining Fiat's auto unit and Ford of Europe would have produced a $20-billion company with a market share of more than 25%, or double that of any other single company in Western Europe.

In an official statement, Fiat said the managements of the two companies had concluded that a venture was not practicable following "differences in management and operational structure."

Reliable sources in this northern capital of the Italian auto industry suggested that neither company was willing to take a secondary role to the other.

Ford ranked No. 1 and Fiat No. 2 in 1984 new-car registrations in Western Europe, according to the Detroit-based trade journal Automotive News.

However, the market is extremely competitive, and neither company has been able to get its own market share much above 13% in recent years because of tremendous overcapacity in European car factories and cutthroat competition for sales.

The Continent's top six companies in auto sales rank just a percentage point or two from each other, and profits, when available, generally are slim. The other four, in order, in 1984 were Volkswagen of West Germany, Peugeot of France, General Motors of the United States and Renault of France.

Both Ford and Fiat have failed before in forming major international combinations in the 1970s. Ford and Toyota Motor Corp. of Japan were unable to form a joint venture for U.S. auto production, with Toyota eventually linking up with GM in California.

U.S., Japanese Firms Expand

Previous attempts of the Fiat group to integrate its production with French partners Citroen and Peugeot also failed.

In advance of the official announcement of the break-off of talks, Fiat executives stressed the need for closer cooperation among European auto makers to resist the continuing expansion of U.S. and Japanese auto companies.

Cesare Annibaldi, head of external relations of the Fiat group, told a news conference that exploiting the European market "of 320 million consumers" was considered an essential achievement for the Italian group by 1992.

Annibaldi noted, however, that European integration was being slowed by nationalistic interests and that research programs of the European Economic Community did not fully meet the needs of European industry.

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