Ford and Fiat Plan to Merge Farm Units

DETROIT —  Fiat Group, Italy’s largest industrial company, and Ford Motor Co. formed a joint venture Tuesday to merge their agricultural subsidiaries into a new company controlled by Fiat.

The move further’s Ford’s goal of ridding itself of its non-automotive operations. Last week, Ford announced it was entering final negotiations with Loral Corp. of New York over the sale of Ford Aerospace Corp.

In the agreement announced Tuesday, which must be approved by the Italian and U.S. governments, FiatGeotech would merge with Ford New Holland. Ford would receive an undisclosed amount of cash and own 20% of the joint venture, while FiatGeotech would own the remainder.

“Our primary objective in creating this new company is to profit from the existing strengths of the two subsidiaries,” said Cesare Romiti, Fiat’s president and chief executive. “We recognize that these two organizations, when combined, will complement each other remarkably well with a truly global presence in virtually every world market.”

The two parent companies have been involved in negotiations over the agricultural operations merger for months. The subsidiaries make agricultural implements, such as tractors and combines.

FiatGeotech has more than 13,000 employees in Italy, Brazil, France and the United States, and reported 1989 revenues of $2.3 billion. Ford New Holland has about 18,000 workers in plants and offices in the United States, Canada, Great Britain, Belgium and Brazil, and collected $2.8 billion in revenues last year.

The parent companies said Fiat would continue current pay and benefits for Ford New Holland employees, who are covered by contracts negotiated by the United Auto Workers union.

The companies also said the subsidiaries’ worldwide markets and identities would be preserved in the joint venture.

The Ford-Fiat deal is the first overseas venture announced by Ford since the U.S. auto maker bought the British luxury car maker Jaguar PLC late last year for $2.5 billion.

So far this year, General Motors Corp. has announced deals in Hungary, East Germany and the Soviet Union. Chrysler Corp. has linked up with an Austrian company in a minivan program.

Ford has said it is discussing with Fiat a deal separate from Tuesday’s joint venture that would involve the two companies’ heavy truck businesses.

There has been speculation in Italy and the United States that Fiat may be talking with Chrysler Corp. about Fiat possibly buying a stake in the financially struggling U.S. auto maker.

Officials from Fiat and Chrysler have declined to comment on the speculation.