Word: citro
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When France's desperately indebt Citroën and Italy's thriving Fiat, which stands next only to the U.S.'s Big Three among world automakers, announced merger plans last month, they got short shrift from Charles de Gaulle. In exercising an effective veto, the De Gaulle government charged that the deal would threaten "the independence of a very important French company...
Still, in the eyes of Citroën President Pierre Bercot and Fiat Chairman Giovanni Agnelli, the French government's non was not absolute. They kept right on conferring and finally produced a plan that won De Gaulle's approval. It called for joining the companies in a "common organism" that would command $2.8 billion in annual sales and be managed by Fiat and Citroën on theoretically equal terms...
Lots of Leverage. Under the new arrangement, Fiat will fall short of achieving the 30-40% of Citroën stock that it had originally aimed for. Instead, it will get only 15%, with no strings attached. Yet Fiat will actually have much more leverage than that, since it will have a large share of a holding company that will control its new partner, Citroën. Most of the holding company's stock will come from France's tire-making Michelin family, which now owns over half of Citroën and which opened the original merger...
...present plan also gives Citroën an option to buy 15% of Fiat. Inasmuch as Citrëen is already carrying debts of more than $100 million (including some $56 million to the De Gaulle government), and needs more capital to develop new models, there is virtually no chance that the French company will ever be able to take advantage of the option. The proviso is, therefore, little more than a face-saving device for De Gaulle...
...cooperate, so long as their mutual dealings did not affect "conditions of employment" and the "equilibrium of the auto market in France," That means that little, if anything, can be salvaged from the original deal, The two companies had intended to share manufacturing plants and probably to channel more Citroën work to Italy's lower-wage labor market, They also had planned to give Fiat access to Citroen's dealer network in France...