GM Deal for Italian Diesel Maker Awaits Release by a Rival

GM Deal for Italian Diesel Maker Awaits Release by a Rival

By Bill Visnic

General Motors announced in mid-July that it wants to acquire from Penske Corp. a 50-percent stake in Italian diesel-engine maker VM Motori S.p.A.

Lost in the fine print is the fact that, as of this moment, that 50 percent isn’t Penske’s to sell.

Before GM can get its hands on its share of VM Motori, Penske must acquire the 49 percent of Cento, Italy-based VM that currently is held by GM rival DaimlerChrysler AG. Penske and DaimlerChrysler assumed joint ownership of VM Motori in 2003.

A Penske source tells AutoObserver a deal has been under way for DaimlerChrysler to sell Penske its 49-percent stake in VM and is awaiting approval from European regulators. The Penske source says that approval is expected imminently.

Meanwhile, GM’s newfound interest in VM has yanked the Italian diesel maker -– all but unknown in the U.S. –- into the pitched battle for early diesel-vehicle leadership here, where one recent study predicts diesel market penetration will outpace that of environmental darling hybrid-electric vehicles between now and 2012.

No automaker currently has light-duty diesel manufacturing capacity in North America, so satisfying that kind of projected growth is going to require partners capable of building the engines, which helps explain GM’s interest in acquiring a stake in VM.

The VM in the company’s name comes from the last names of its two founders, Vancini and Martelli. The company began in 1947, situated in the same region of Italy that is home to Ferrari and Lamborghini and motorcycle legend Ducati. Its first diesel engine, a simple model designed to meet the needs of a battered Europe rebuilding after World War II, nonetheless featured direct fuel injection, a power- and refinement-enhancing innovation that has helped to transform today’s new-technology diesels into viable alternatives to gasoline engines.

Early VM diesels were earmarked for industrial sectors, but the worldwide energy crisis of the late 1970s attracted VM Motori into the automotive and commercial-transportation markets, and the 1979 Alfa Romeo Alfetta was the first series-production passenger vehicle to use a VM-made diesel.

In 1990, VM introduced its regarded Turbotronic turbocharged 4-cylinder diesel, which subsequently was used in Europe by several automakers, including Ford, Chrysler and GM. In 1995, VM was bought by Detroit Diesel Corp., and in 2000, both VM and Detroit Diesel were bought by DaimlerChrysler.

At the Geneva Motor Show in March, GM said VM would supply it with an all-new, 2.9-liter V6 turbodiesel earmarked for the European version of the Cadillac CTS in 2009 and said to be coming to the U.S. for the CTS (and perhaps the Saturn Aura) in 2010.

GM has since said it is examining the case for other diesel-powered vehicles for the U.S., making it likely to assume the General may call on VM for potential development and/or manufacturing capabilities for engines other than the new V6.

GM’s intention to purchase a 50-percent interest in VM Motori does add intrigue to current owner DaimlerChrysler’s future with VM, however. The two companies currently are heavily intertwined, with VM supplying diesels for numerous Chrysler-badged vehicles in Europe, including the Chrysler Voyager minivan and every Jeep sold on the Continent.

But with Daimler-Benz and the Chrysler Group ready to part company, it’s likely Daimler -– soon to be sans Chrysler -– sees the VM connection as expendable: all models from Daimler’s Mercedes-Benz unit are fitted with diesels made only by Mercedes.

The real question is whether GM, once it owns half of VM, will tolerate its new acquisition continuing its engine-supply arrangements with rival Chrysler.

About the Author

Bill Visnic is a nearly 20-year veteran of automotive journalism. He started at Car & Driver magazine, spent 13 years covering automotive technology for the Ward’s Automotive Group, and now is one of the press corp’s leading authorities on automotive powertrains and technology.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.