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Staff writer

Fiat Auto S.p.A. should form a strategic alliance with other automakers to be more competitive in the rapidly changing auto industry, the chief executive of IFI S.p.A., a major shareholder in the Fiat group, said Thursday.

“I think Fiat has a possibility of staying by itself,” IFI CEO Umberto Agnelli said. “But, surely, it will be much stronger if the management (of Fiat) has some sort of cooperation with other firms. I think that this is something the managers are looking for.”

IFI owns a 17.5 percent stake in the Fiat group, Italy’s largest industrial group. Agnelli is also the chairman of IFIL S.p.A., an affiliate of IFI, which owns 12.25 percent of the Fiat group.

Earlier this year, Fiat Auto and Mitsubishi Motors Corp., Japan’s fourth-largest automaker, agreed to jointly develop a sport utility vehicle under the Fiat brand.

The move has stirred speculation that the two automakers may move closer to each other as part of the industrywide quest to form strategic alliances.

“Financial cooperation (between Fiat Auto and other automakers) is not inevitable, but it will be positive (for Fiat Auto),” said Agnelli, who is visiting Tokyo to attend the 11th Italy-Japan Business Group meeting today.

Agnelli, grandson of a founder of the Fiat group, said that Fiat Auto and MMC are not negotiating any ties at present, though he did not rule out the possibility that technical cooperation may evolve into financial cooperation in the future.

“It can be technical cooperation (in the) first case and can become financial cooperation that includes capital exchanges or exchange of sales and so on. We don’t have a crystal ball to read the future,” Agnelli said.

Agnelli pointed to re-organization among auto parts suppliers as an important development in the industry. Even in Japan, where “keiretsu” corporate group ties have been strong, the links between parent companies and their affiliates have begun to weaken, he said.

“Consolidation is happening at the level of assemblers. But a big change is on the component side. What is really happening in Japan is that suppliers (that are) part of keiretsu are getting more free (from their groups). That is a very important step,” Agnelli said.

Nissan Motor Co. announced last week that it will halve the number of its suppliers to 600 firms, and maintain business relationships with only competitive suppliers.

Nissan’s move is expected to force its suppliers to seek other business partners outside their keiretsu, triggering a further shakeup in the automotive industry.

“What is going to be needed for an automotive company in the future is (to have) a fantasy and flexibility,” Agnelli said.

Agnelli is co-chairman of IJBG, which meets annually in an effort to increase investment and trade between the two countries, particularly for small and medium-size companies.

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