After Chrysler merger, Fiat could move to U.S.
SOUTHFIELD, Mich. - Fiat SpA, Italy’s biggest manufacturer, is considering moving its corporate headquarters to the United States following a planned merger with Chrysler, three people familiar with the matter said.
Chief Executive Officer Sergio Marchionne is evaluating the switch from Turin, where Fiat was founded in 1899, to the U.S. as the carmaker’s revenue and profit center shifts to North America, the people said, asking not to be identified discussing the internal deliberations. Fiat generated 75 percent of 2012 operating profit in North America.
No final decision on the headquarters has been made and other options are being examined, the people said. A Fiat representative declined to comment. Marchionne said last month that he favored a primary listing in New York for the company.
Moving Fiat’s headquarters away from Turin’s iconic Lingotto, a former car plant with an oval track on its roof, could create a political backlash in debt-ridden Italy, where the industrial sector is in decline. The unemployment rate is near a 20-year high as companies refrain from hiring amid the country’s longest recession in more than two decades.
"It’s the logical solution as the center of gravity of the group has moved to the U.S. and for its ambition of becoming a global player," said Giuliano Noci, associate dean of Milan Polytechnic’s business school.
Chrysler, based in Auburn Hills, has become the group’s profit generator as Fiat struggles to end losses in Europe, which totaled more than 700 million euros ($900 million) last year.
Fiat’s dependence on Europe has been reduced drastically since it took control of Chrysler in 2009. The region in 2012 represented 24 percent of the group’s 84 billion euros in revenue. When Marchionne was named CEO in 2004, Fiat relied on Europe for more than 90 percent of its 27 billion euros in sales.
"Europe is becoming a less and less relevant fact in the scheme of things," Marchionne told analysts last month. "It’s a reflection of the ability of this house to shift its interest and to shift its resources to markets that are much more rewarding in terms of investment and return."
Marchionne also said the decision on the location of the headquarters will depend on access to capital markets and the ability of the company to get financing at "reasonable rates."
"The U.S. capital market is more efficient than the Italian, and as a result the carmaker would probably get cheaper refinancing," said Sascha Gommel, an analyst with Commerzbank in Frankfurt, who expects Fiat to retain a listing in Milan.
Fiat will keep its European headquarters in Turin at the Lingotto building, which opened in the 1920s after founder Giovanni Agnelli visited Ford’s Detroit-area plants, the people familar with the deliberations said. Auto production at the complex stopped in the 1980s.
"I can’t imagine that there would be a wholesale exit from Italy," Richard Hilgert, an analyst for Morningstar Equity Research in Chicago, said in a phone interview. "But capital markets in the U.S. are a little bit less costly than the ones in Europe, especially in Italy."
The carmaker is boosting production of upscale models in Italy, including the $130,000 Maserati Quattroporte, as it aims to end losses in the region by 2016. Fiat’s plan calls for 16 new high-end cars, which will help fill capacity at the company’s under-utilized lines. Fiat, which has about 29 percent of its 215,000 employees in Italy, doesn’t plan to reduce its workforce in the country.
Fiat, Italy’s biggest private-sector employer, is a key part of the country’s commercial fabric. Its name is an acronym for Fabbrica Italiana Automobili Torino, or Italian car factory of Turin. The company, pushed by the Agnelli industrial family, played a key part in Italy’s emergence as a manufacturing power after World War II and its 500 subcompact is a national symbol of the postwar economic boom.
Before the locations for the listing and headquarters can be finalized, Fiat first has to buy the remaining 41.5 percent Chrysler staked owned by the United Auto Workers retiree health- care fund. The two sides are disputing in court the price for a portion of the shares Fiat is seeking to buy by exercising options.