“We are delighted to have been able to conclude this agreement with General Motors", commented Fiat Group Chairman Luca di Montezemolo this evening, as the Italian carmaker gave its reaction to the deal.

Finally the protracted wrangling over the controversial 'put' option is over, and initial glance reveals a deal that looks very favourable to Fiat. With cash being of vital importance to Fiat, this figure overrides all other considerations, and the 1.55 billion euros, fully payable within 90 days will help ease the company's cash burn.

Powertrain will be wound up, with the two companies jointly owning its 'intellectual propety' and all assets returned to their original owner. In a boost for diesel production, GM will continue to buy the majority of these engines from Fiat, with most continuing to be built in Italy.

Interestingly Fiat CEO Sergio Marchionne said that the three Fiat brands: Fiat, Lancia and Alfa Romeo, could now be split apart, and he envisions a closer relationship between Alfa Romeo and Maserati, with the latter likely to be returned to Fiat's Auto Division. The new position will now allow Lancia to proceed with mooted new ventures.

Fiat Spa released the following detailed statement this evening:

GM agrees to pay €1.55 billion to terminate the Master Agreement, including cancellation of the put option, the unwinding of all joint ventures and return of GM’s 10% equity interest in Fiat Auto Holdings to Fiat. The settlement will allow GM to continue to use some of Fiat’s diesel technology and to own a 50% interest in the Bielsko-Biala (Poland) plant which manufactures 1.3 litre diesel engines.

The Boards of Directors of Fiat and General Motors have met today to approve a contract to terminate the Master Agreement and related Joint Ventures between the two companies.

'The Chairman of Fiat, Luca Cordero di Montezemolo said We are delighted to have been able to conclude this agreement with General Motors. While highly beneficial to both Fiat and GM since 2000, the arrangements had become too confining for the development of Fiat Auto in today’s market environment. We now have all the necessary freedom to develop strategic growth alternatives for Fiat Auto, while retaining a base on which to build a much more constructive relationship with GM in the future.
 

“I believe that the successful outcome of the negotiations will create an important stimulus for Fiat Auto’s workforce to achieve the ambitious objectives that they have set themselves. It is also a most positive response for our customers, for whom we will be introducing four completely new models (two Fiat and two Alfa Romeo) in 2005.

The Chief executive Officer of Fiat S.p.A,, Sergio Marchionne said: “I firmly believe that the settlement reached with GM is fair and equitable to both parties. While on the one hand it deals with the valorization of the put option contained in the Master Agreement, it grants Fiat all the necessary freedom to develop its Auto business.

"We can now clearly focus on the operational objectives of Fiat Auto, and devote our full energies to the re-establishment and rationalization of our brands and the building of an effective network to maximize the success of our new product portfolio. The benefits of the relationship with GM are being preserved through a long term supply arrangement and other cooperation agreements, such as participation by Fiat in the GM alliance purchasing team model.”

The settlement agreement includes, among other things, the following items: • GM will pay to Fiat €1.55 Billion, €1 billion of which will paid immediately, with the remainder being paid upon completion of the unwinding of the Joint Ventures, which is expected within 90 days. • GM will return its 10% stake in Fiat Auto Holdings to Fiat. • GM will own 50% of the Bielsko Biala, Poland, plant which manufactures the 1.3 liter Diesel engine as well as 50% of the related intellectual property, • GM will co-own JTD engine technology while continuing to take most of its European requirements from the Fiat plant in Pratola Serra. Notwithstanding co-ownership of the intellectual property rights, GM cannot manufacture JTD Diesel engines outside Europe that are to be exported to Europe. • Both Fiat and GM will continue to support the joint development of existing platforms. • Fiat will continue to sell engineering support to GM for the development of diesel technology.

The unwinding of the joint ventures and the supply agreements will be put in place as quickly as possible in order to avoid any potential disruption to the respective businesses.