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Fiat Will Buy Alfa Romeo, Besting Ford's Bid

November 07, 1986|DON A. SCHANCHE | Times Staff Writer

ROME — Ford Motor Co. lost its bid Thursday to take over the ailing state-controlled auto maker Alfa Romeo to its Italian rival Fiat, which offered more than $5 billion for 100% ownership.

Ford was understood to have offered about half as much for a part of the company and intended to increase its share of ownership gradually, beginning with 19.5% and reaching 51% only after three years.

"The late Henry Ford was quoted as having said, 'Whenever I see an Alfa Romeo go by, I take off my hat,' " one executive here said. "Now he can take it off and wave goodby."

The announcement of Fiat's victory in the competition on the eve of the expiration of Ford's less-comprehensive offer came from the Istituto per la Reconstruzione (IRI), the state conglomerate that controls Finmeccanica, a state-controlled holding company that directs Alfa Romeo and, with IRI, owns all of its shares.

The decision to sell the money-losing Italian car company to Fiat must be ratified by a government committee before it becomes final, but approval is taken as a virtual certainty and may come as early as today, according to committee sources.

Alfa had appeared to be an unlikely prize because of its persistent losses, which were $175 million last year. But industry observers said both Ford and Fiat were attracted by the competitive edge that Alfa, with its 9.8% share of high-performance auto sales in Europe, would give them.

The decision in favor of Fiat was only partially influenced by the expected political repercussions if Alfa Romeo were to fall into the hands of an American auto maker, according to IRI officials. They said their unanimous decision turned on the economic advantages of Fiat's all-encompassing bid for the whole Alfa group, as opposed to the Ford bid, which singled out Alfa Romeo Auto, the company's biggest division, which makes sports and touring cars.

The IRI officials said Fiat also pledged to invest more money in a new venture that would combine Alfa with Fiat's luxury Lancia division, and it gave firmer guarantees concerning the number of Italian workers that it will employ in the future.

"The proposal of Fiat is considered economically more advantageous," said Romano Prodi, chairman of IRI, after announcing the decision.

In London, Ford of Europe's president, Alexander J. Trotman, said his company's offer "was not one we intended to increase" and "that remains our position."

"We believe that it represented not only a realistic recovery plan for Alfa Romeo but also a financially sound investment for Ford," he said.

According to a sketchy outline of the offers released by IRI, Ford focused on the Alfa auto division as its goal and sought to postpone coming to terms with what it would do about the group's remaining six divisions, including Alfa's commercial vehicle line and its credit and leasing organization.

Fiat's proposal was a clear-cut bid for the entire Alfa Romeo group, Prodi said. Fiat also spelled out the number of workers that it would employ--28,000 from Alfa and a total of 37,000 in the new Alfa-Lancia venture--while Ford promised only to trim payrolls by attrition rather than by layoffs and to keep enough workers to meet "European levels of productivity," according to the brief IRI outlines of the two bids.

The outlines did not specify financial details beyond listing the total amounts each company had offered to invest in the next seven to eight years in order to turn Alfa back into a profitable company. There was no authoritative breakdown of the actual cash acquisition costs involved or of investment timetables.

However, Fiat's total commitment was said by industry sources to be about 8 trillion lire (about $5.7 billion).

Ford pledged 4 trillion lire (about $2.85 billion) to be invested by 1994.

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