Subject category:
Finance, Accounting and Control
Published by:
IBS Research Center
Length: 16 pages
Data source: Published sources
Share a link:
https://casecent.re/p/61992
Write a review
|
No reviews for this item
This product has not been used yet
Abstract
Towards the end of the 1990s the European car market showed a declining trend which affected many of the major players. Amongst those affected were Italian automobile manufacturers Fiat Auto and Opel, the European wing of General Motors (GM). Faced with the task of arresting eroding bottom-lines, the two entered a deal where 20% of Fiat''s stock was exchanged for 6% of GM''s stock. The agreement had a ''put option'' in favour of Fiat where it could sell the rest of its 80% to GM at a future date. Faced with dire financial problems, Fiat decided to exercise the option towards the end of 2003, but GM, which had its own troubles, was reluctant to take over the ailing Fiat. Unable to reach an agreement, the two partners seemed set to fight it out in court. The case can be used to discuss the following points: (1) a look into the reasons behind Fiat''s financial problems; (2) the advantages and disadvantages of ''put'' and ''call'' options; (3) the legalities of joint ventures; and (4) a discussion of the future of the GM-Fiat alliance.
About
Abstract
Towards the end of the 1990s the European car market showed a declining trend which affected many of the major players. Amongst those affected were Italian automobile manufacturers Fiat Auto and Opel, the European wing of General Motors (GM). Faced with the task of arresting eroding bottom-lines, the two entered a deal where 20% of Fiat''s stock was exchanged for 6% of GM''s stock. The agreement had a ''put option'' in favour of Fiat where it could sell the rest of its 80% to GM at a future date. Faced with dire financial problems, Fiat decided to exercise the option towards the end of 2003, but GM, which had its own troubles, was reluctant to take over the ailing Fiat. Unable to reach an agreement, the two partners seemed set to fight it out in court. The case can be used to discuss the following points: (1) a look into the reasons behind Fiat''s financial problems; (2) the advantages and disadvantages of ''put'' and ''call'' options; (3) the legalities of joint ventures; and (4) a discussion of the future of the GM-Fiat alliance.