Buyer’s Remorse: GM’s Alliance with Fiat

This is one of the more bizarre tales in recent years of how strategic alliances may go awry. The case focuses on how an element of the Master Agreement signed between General Motors and Fiat—the put option—resulted eventually in the destruction of a highly successful series of joint ventures between these two large automakers. The pivotal element, the put option agreement embedded within the agreement, eventually resulted in GM agreeing to pay Fiat $2 billion in February 2005 to "annul" the entire alliance. The case raises questions about the due diligence by the two companies in preparing for the agreement, the actual construction of the agreement itself, and the unfortunate series of events which eventually resulted in Fiat leveraging the embedded put to extract a large exit payment from GM. In the end, the case may also be used to question what the value of an acquisition is to an acquirer, including the associated responsibilities and liabilities associated with an existing operating business.