Part of Fiat's plans call for GM to contribute to the planned capital increase in exchange for a cancellation or postponement of the put option. But GM is unlikely to be eager to inject capital directly into Fiat's auto business. American accounting rules would oblige GM to adjust its own reported earnings to reflect a portion of Fiat Auto's losses if GM's ownership rose above 20 percent, though a capital increase would not necessarily enlarge GM's stake.
It is not clear that Fiat could force GM's hand by exercising the put option. Many analysts believe such a move would be tied up in litigation. One difficulty would be determining a fair value for Fiat Auto, a process that would involve negotiations with four investment banks, according to the terms of the option.
GM gave an early indication of its diminishing assessment of Fiat's auto business when it wrote down the value of its stake on its own books by 90 percent, from US$2.4 billion down to US$220 million, in the third quarter of last year.
"I think they would have a hard time exercising the put and making it stick," Stephen Girsky, an analyst at Morgan Stanley, said of Fiat.
Even so, having Umberto Agnelli rather than Gianni Agnelli in charge at Fiat "changes quite a lot, it is quite a big change," said an analyst in London who follows the company. He and others expect Umberto to be much more willing than his brother to move Fiat quickly away from the car business. But the analyst said, "The devil is going to be in the detail."
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