May 4 (Bloomberg) -- Fiat SpA, the Italian carmaker taking over Chrysler LLC in the U.S. and trying to buy General Motors Corp.’s European unit, may seek to purchase GM operations in Latin America, China and Russia to expand its reach.

Fiat is looking at not just GM’s Germany-based Opel, but also at the Detroit automaker’s operations in emerging markets, people familiar with the matter said. GM is negotiating with automotive companies and investors interested in Opel and is separately talking to Fiat about tie-ups involving GM operations such as those in Latin America, they said.

Fiat’s foray with Chrysler will return its models to the world’s biggest auto market. Further acquisitions would help satisfy Chief Executive Officer Sergio Marchionne’s craving for annual sales volume of more than 5 million cars.

“If Marchionne gets GM’s organization in China, he potentially has the volume he reckons he needs,” said Peter Schmidt, an analyst at Automotive Data in Leamington Spa, England. “Or GM Russia, and use that as a springboard to neighboring countries.”

Turin-based Fiat sold 2.15 million autos last year and adding Auburn Hills, Michigan-based Chrysler will lift the total toward 4 million. While that’s still short of the number Marchionne says will guarantee long-term viability, GM last year achieved 1.5 million sales at Opel, 1.3 million in Latin America and 1.5 million in the Asia-Pacific region.

GM says it’s open to offers for Opel, which is running out of cash and seeking 3.3 billion euros ($4.3 billion) in German aid. The automaker may also be forced to sell assets in emerging markets as it faces filing for bankruptcy protection unless it reorganizes out of court by June 1.

Chrysler ‘Not Enough’

“Chrysler plus Fiat is not enough,” said Serge Escude, an analyst at Cassa Lombarda in Milan. “We can expect something more.”

Marchionne said he regards Opel as an “ideal partner” and is now concentrating on buying that part of GM, according to a report last week in Fiat-owned Italian newspaper La Stampa.

Fiat’s board, which met yesterday to review Chrysler agreements, also said it supports Marchionne’s efforts to buy General Motors Europe and would consider merging Fiat’s automobile operations into a new company with Chrysler and GM’s European activities.

“The group would evaluate several corporate structures, including the potential spin off of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe,” the board said yesterday in a statement.

Opel Appeal

Simon Empson, managing director of Web-based auto retailer Broadspeed.com, said he’s skeptical that Fiat can pull off the purchase of Opel if it goes ahead with a Chrysler deal and that the Italian company would be better off ditching the Chrysler agreement, announced last week as part of President Barack Obama’s plan to save the U.S. auto industry.

“I see more advantage for Fiat in GM Europe,” Empson said. “It’s considerably better run and has a better product lineup then Chrysler.”

Fiat faces competition for Opel from suitors including Magna International Inc., North America’s largest auto-parts maker, which has held talks with German government officials about a purchase. Russian billionaire Oleg Deripaska, owner of carmaker OAO GAZ, may be considering an offer, Rheinische Post reported April 29. The company declined to comment after initially denying interest.

“The talks with a couple of interested parties will be held in the coming days,” Joerg Schrott, an Opel spokesman, said in a telephone interview May 2. He declined to identify investors.

Talks This Week

Other parties interested in Opel include sovereign wealth funds Abu Dhabi Investment Council and the Government of Singapore Investment Corp., and three private-equity funds, according to one of the people familiar with negotiations.

Bidders for Opel, based in Ruesselsheim outside Frankfurt, will meet with GM this week to seek clarity over financial data before each presenting an “industrial plan,” German Economy Minister Karl-Theodor zu Guttenberg said April 28.

Marchionne will make his case today to German government officials and the head of Opel’s works council, the London-based Financial Times reported.

Unlike the Chrysler deal, in which U.S. and Canadian unions agreed to concessions to help save the company, a Fiat purchase of Opel is opposed by German unions. The state of Rhineland- Palatinate, where Opel has 3,400 workers at an engine factory, also is against a tie-up.

Fiat may be better off bidding for GM assets outside western Europe, according to Automotive Data’s Schmidt.

China, Russia

“It doesn’t have to be Opel,” Schmidt said. “If any market is important in the years ahead, then China is the market and Fiat is not a big player.”

Fiat also would benefit from taking over GM operations in Russia, Schmidt said, particularly after the country’s market stabilizes, which he forecasts will take about 18 months.

Russian car sales advanced 26 percent last year. GM’s China sales growth has slowed in line with the waning local market. The automaker boosted 2008 sales 6 percent compared with a 19 percent increase a year earlier. Even so, U.S. car sales are at two-decade lows. And sales in Europe are likely to drop 20 percent this year, the European Automobile Manufacturers’ Association said on March 5. Last year in Europe, auto deliveries fell 7.8 percent.

The decline weighs against Fiat doing more major deals in western Europe, particularly entertaining a combination with PSA Peugeot Citroen, according to Broadspeed.com’s Empson.

No Peugeot

“PSA has been struggling to create products that are dynamic enough, especially to take on the German rivals,” he said. “Fiat could suffer in a tie-up.”

Fiat had 9 percent of the European market in 2008, according to the industry trade group. Volkswagen’s brands led the pack at 19 percent, followed by Peugeot Citroen at 13.2 percent. If Fiat took all of Opel, including the Vauxhall brand in the U.K., its share would rise to about 16 percent.

Mark Fulthorpe, an analyst at automotive industry consultant CSM Worldwide in Byfleet, England, said Fiat may not end up with GM’s Opel because of the competition. “If you take the view that Fiat doesn’t want to put any cash on the table, that would take them out of the running.”

Selective Purchasing

Fiat already has advantages in its product lineup and manufacturing agility that make it a natural for combining with Chrysler, which needs its small-car technology and ability to share materials and introduce new models quickly. That means it can be selective in making purchases, Empson said.

“What really needs to happen is that fewer factories are building fewer cars, enabling manufactures to adjust quickly to viable types of cars people want to buy on which they can make money, and Fiat is actually already there,” he added.

Guiseppe Berta, who studies Fiat as a professor at Bocconi University, said Latin America and Asia expansion makes sense.

“I was at Fiat’s Christmas dinner when Marchionne told managers his plan to create a group that produces 5 to 6 million vehicles every year,” he said. “I expect Opel to be sold to Magna and Fiat to get the Latin America division of GM. Marchionne then should expand in Asia, especially in China and India, where GM has good relationships.”

Buying GM’s Latin American division makes sense under Marchionne’s plan to survive by growing, said Luca Peviani, a managing director at P&G Sgr SpA.

“Fiat decided, instead of defending its niche market in Italy, to be a predator worldwide,” he said. “This is the first, but not the last, structural deal.”

Marchionne, 56, signed an agreement with Chrysler last week as Obama announced a government-backed plan to send the U.S. automaker into bankruptcy protection and shed debt. Fiat will take a 20 percent stake initially, and increase its ownership as it meets goals.

Chrysler filed for bankruptcy in New York and will reorganize into a new company that retains some of its assets.

Managing combinations won’t be easy, Marchionne told his company’s newspaper. “We can’t make any mistakes now; the whole world is watching us and the responsibility is enormous.”

To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net; Sabine Pirone in London at spirone@bloomberg.net

Last Updated: May 4, 2009 02:00 EDT