The board of Fiat Spa are holding an extraordinary board meeting this afternoon, a possible indication that a deal has been reached with GM over the disputed 'put' option.

News of the meeting, which was called at very short notice, only leaked out yesterday, and its timing comes as the pressure over the 'put' option reaches new heights. Sources believe that Fiat's CEO Marchionne will present the board with a GM offered solution, immediately on his return from a US visit.

Fiat seeking a swift resolution of the controversial 'put' option

After the 30-day mediation period between GM's boss Rick Wagoner and Sergio Marchionne ran out on the 2nd February, the opening of the exercise period 'window' was thus reached. The way is now there for Fiat to press the contested option into force, a move which will firstly trigger a New York tribunal to decide on its validity.

The 'put' option was added to an agreement signed by Fiat and GM in 2000, and allows the Italian firm to force the American giant to purchase the remaining 90 percent of Fiat Auto it doesn't already own.

For their part, GM vigorously contest the continuing legality of the option, at least in public. They cite financial and structural changes to Fiat Auto implemented over the last few years, as having changed the term and rendered it invalid.

Front pages stories in the Italian press today report that Fiat Group Chairman Luca di Montezemolo as having delayed a planned trip to India, with President of the Italian Republic Carlo Ciampi, to attend this afternoon's unscheduled board meeting.

In the first sign this week that an agreement was in the offing, Montezemolo commented on Thursday evening, on the occasion of a gala event being held in the lead up to the 2006 Winter Olympics which are being staged in Turin, that the 'put' option, "is a great problem to which all we are working with engagement and on whose solution we are optimistic."

Resolution of option will allow Fiat to strike up new deals with other car makers

Apart from the financial reward, reputedly to be in the region of 1.5-1.8 million euros, GM would have to pay to Fiat to be absolved from the terms of the 'put' option, the deal would also hinge on the Italian firm being able to strike deals with other global car markers, something that the agreement prevents in its present format. Fiat have also been unimpressed by the lethargic deadlines which GM adhere to, especially as the Italians are now trying to rush out lots of new models.
 

Peugeot and Toyota are the usual names 'in the frame' for new alliances. Fiat already have a successful long-running Light Commercial Vehicle agreement, recently extended, in place with PSA, and with the French firm's partnership deal with Japanese giant Toyota to build a new small car now gearing up for the production phase, rumour has it the Fiat could now enter this equation.

PSA Peugeot Citroën and Toyota Motor Corporation (TMC) recently announced that their three-year joint project to design, develop and produce three all-new small passenger cars for the European market is now close to fruition.

The new vehicles, the Peugeot 107, Toyota Aygo and Citroën C1, are due to go on sale this year once they have been officially unveiled in the metal to the public at the Geneva Motor Show, in a fortnight's time.

Meanwhile, ending the GM partnership would allow the Maserati brand to be brought back into the Fiat fold. While this would remove the loss-making Trident marque from Ferrari's books ahead of a planned IPO, it would also let a much discussed tie-up with Alfa Romeo to get the go-ahead.

Powertrain to be handed to Fiat as part of any settlement?

It is also being touted that Fiat will take full control of Powertrain as part of any settlement with GM. Powertrain is the 50-50 engineering joint venture set up between the two firms at the time of the agreement in 2000. This would see a Fiat-owned Powertrain continuing to supply GM with its advanced diesel engines, a vital move for their European Opel arm, as oil burners are sweeping up market share across the continent.

Extension of Fidis Retail Italia agreements

While GM continue to cite the part sale of Fidis, Fiat Auto's financial arm, as one reason for regarding the 'put' option as no longer being valid, Fiat are playing very carefully to allow GM no room for maneuver. In fact Fiat continue to hold an option to repurchase Fidis if they should so wish.

Fiat Spa on Wednesday released the following statement: "Fiat Auto, Fidis Retail Italia and Synesis Finanziaria (a company controlled by Banca di Roma, Banca Intesa, Imi Investimenti and UniCredito Italiano) have agreed a two-year extension of the cooperation agreements and shareholders’ agreements signed in May 2003.

"In the light of the positive results achieved by the joint venture, the aim of said extension is to ensure market support and stability to the financing activities performed by Fidis Retail Italia in connection with Fiat Auto’s car sales. The extension also applies to Fiat Auto’s option to purchase the 51% stake in Fidis Retail Italia held by Synesis Finanziaria. Said option is now exercisable until January 31, 2008."