Beating Targets

Savings from synergies between General Motors Corp. and alliance partner Fiat SpA are in the “hundreds of millions” and exceeding expectations, says GM Chairman and CEO Rick Wagoner.

A steering committee of top management from the two sides meets quarterly to get a running tab on synergy savings and evaluate what's working and what's not. The most recent meeting took place in Frankfurt, on the eve of Germany's biggest auto show.

“We're beating targets,” says Wagoner. “At the same time, we're investing in some out-of-pocket things to expand the common interest. We're running well in excess of the initial forecast.”

The GM-Fiat powertrain and purchasing joint ventures are expected to save each company E2 billion ($2.2 billion) by 2006.

Wagoner points out that even though the volume base is quite a bit lower for both auto makers, the euro is helping cost efforts on a per-unit basis.

Fiat runs its brand distribution strategy with no input from GM, which owns 10% of the company. GM says it has no current plans to increase its stake and has no seats on any Fiat boards.

Discussions center on fundamental areas to cut costs: powertrains, platforms and purchasing. “We're exploring other areas of cooperation on cost,” Wagoner says, including platform co-development of architectures, as well as logistics.

But there is no need to look at sharing assembly until the two car makers have products that align. Wagoner admits U.S. distribution of Alfa Romeo has been delayed, with Alfa's American return appearing set for 2007. He says Fiat wants to develop new products for the U.S. market rather than retrofit existing designs.