20000315Fiat future seen less dependent on cars

MILAN: Italian industrial giant Fiat's future strategy could be to reduce the weight of its struggling car division and focus on boosting other more meaty parts of the group, analysts said on Tuesday.

Fiat stock slumped on the Milan bourse following Monday's announcement of an alliance with General Motors in what analysts said was disappointment the deal did not include cash for shareholders or clearer cost benefits in the short term.

Fiat plans to swap 20 percent of Fiat Auto for 5.1 percent of stock worth $2.4 billion in GM, the world's biggest player.

Sidelined rival DaimlerChrysler had offered to buy the whole of Fiat Auto.

John Lawson, auto analyst at Salomon Smith Barney, said: "I think Fiat's strategy is to minimise the impact of cars on total group activities, with the idea of building up the other parts of its business."

Apart from jewels in the group's crown like Case New Holland in farm machinery and Comau in robotics, he mentioned Fiat's recently launched "new economy" ventures like its Ciaoweb website and the Viasat satellite positioning company.

"You have to be realistic about what you can do but over time, I think Fiat will minimise the impact and prominence of the car operations within the group as a whole," Lawson said.

"Therefore they will probably exercise the put option to sell (included in the deal) but this will need time," he added.

"The reality is that car-making doesn't make money and you have to focus on downstream this is something Fiat has been doing and I think this is the right direction," said one London-based analyst who declined to be named.

FIAT FUTURE FOCUSED ON SERVICES, E-TRADE

Analysts note Fiat's car business accounts for only about half group turnover of some $47 billion.

They say Fiat's vision is to be an all-round service company with less emphasis on carmaking, and more involved in planning, design, maintenance, technical know-how and marketing. Fiat group units already hold sway in many markets:

Fiat unit New Holland's $4.6 billion takeover of U.S. Case Corp last year to form CNH Global NV has made it the world's largest maker of farm tractors and combines.

Comau is the world leader in automated production systems

Magneti Marelli is a giant in the automotive components sector.

Fiat has also launched itself on the Internet with its Ciaoweb site, highlighting the vast and varied range of Agnelli empire interests, ranging from holidays to insurance and stores.

But the Agnellis battled to maintain control of one of Europe's most prominent family-held empires.

The new GM accord includes a so-called "put" clause allowing Fiat to sell the remaining 80 percent of Fiat Auto to GM at "fair market value" by around the end of the decade.

Asked whether that suggested Fiat was selling out of cars "in instalments", Agnelli told La Stampa newspaper: "That is a malicious, illogical objection, which does not hold up. If things go well, as we hope, it won't enter our head to sell."

Agnelli confirmed that DaimlerChrysler had wanted to buy the whole of Fiat Auto. "If we had wanted to sell, we would have done it straight away."

"There's a specific part of the (GM) accord that demonstrates our desire to remain in the auto sector," Agnelli said, referring to the put option. "If things go well we would never imagine selling."

John Buckland, analyst at Daiwa SBCM Capital Markets, was more forthright. "Fiat shareholders would have wanted to be rid of the car subsidiary entirely," he said.-Reuters