Fiat Group has announced that it has reached an agreement to acquire the entire capital of Italian components supplier Ergom Holdings, which just days after it was linked to a bid to take back control of TK Aluminium.

Turin based Ergom Holding SA has been in severe financial difficulties for sometime and Fiat will be acquiring the Turin-based firm for a 'symbolic' price as it will also be taking on its debts and liabilities. Ergom has 4,000 staff located at 11 facilities worldwide, with three being in Italy, and others in France, Brazil, Poland and Turkey; it currently has sales of 540 million euros with more than three quarters of this coming from Fiat.

This latest acquisition comes as part of a changing mood amongst carmakers who are now buying up troubled suppliers to ensure a smooth flow of parts. During the first half of the decade the major carmakers hived off many of their own components operation's and heavily squeezed external suppliers as raw material prices rose, resulting in a string of high-profile bankruptcies, most notably of the US giant components maker Delphi, which applied for Chapter 11 protection two years ago after losing billions of dollars. Fiat CEO Sergio Marchionne has made sorting out the complicated supplier structure a key strategy and has recently entered into a number of long-term partnerships.

A wage dispute at Ergom Holding during the second quarter of 2007 supposedly cost Fiat 33 million euros according to reports circulating yesterday. Last summer Fiat and Iveco's manufacturing output was hit by a wage strike at supplier CF Gomma, an Italian firm which makes rubber products and which has 11 plants in seven countries, which resulted in the loss of production of cars including the best-selling Grande Punto. Fiat hopes that by acquiring Ergom Holding it will ensure a continuing smooth flow of parts. Ergom makes a range of plastic moulded parts, such as bumpers for the new Ducato van, to small components like pedals.
 

The acquisition is still to be subjected to antitrust clearance and due  diligence which is expected to be completed in September, Fiat said in a statement today, adding that this acquisition will ensure the continuation of supplies.

Meanwhile over the weekend it was reported by The Financial Times that Fiat had made a bid for control of TK Aluminium. The firm makes aluminium products including cylinder heads, cylinder blocks, transmission cases and suspension components and operates manufacturing facilities in Europe, North America, South America and Asia. Fiat is the main customer of the financially-troubled firm and until September 2002, Teksid Aluminium was a division of Teksid S.p.A., which is part of the Fiat Group. Through a series of transactions completed between September 30, 2002 and November 22, 2002, Teksid S.p.A. sold its aluminium foundry business for 460 million euros to a consortium of investment funds led by equity investors that include affiliates of each Questor Management Company, LLC, JPMorgan Partners, Private Equity Partners SGR SpA and AIG Global Investment Corp.

Despite achieving revenues of 990 million euros in 2004 and 1 billion euros in 2005, TK Aluminium made a small loss that second year, which then more than tripled to a 67 million euro deficit during the first three quarters of 2006 - the last financial period that the firm has reported on. TK Aluminium has over the last year disposed of a number of assets, including operations linked to Fiat's manufacturing plants in Poland, China and Turkey, with employee numbers dropping to around 1,000. It still has two busy Italian plants which are considered to be strategically vital to Fiat's manufacturing operations. Fiat will be expected to pay a small price for TK Aluminium as it will be taking on its liabilities.