In a blow to Italy’s industrial ambitions, Fiat SpA, the Italian auto maker that last week took full control of Chrysler, will shift its focus outside of its home country with a New York Stock Exchange listing and a tax domicile in Britain.
The company, led by Italian-Canadian CEO Serigio Marchionne, 61, is also expected to move the headquarters of the new global company, to be called Fiat Chrysler Automobiles, to Detroit.
The announcement came as Fiat posted disappointing financial results that sent the Milan-listed shares down more than 5 per cent. The fourth quarter trading profit (earnings before interest, taxes and one-time items) was euros 931-million, considerably less than analysts’ forecasts.
Fiat and Chrysler formed a partnership five years ago, when Chrysler emerged from Chapter 11 bankruptcy protection in the United States. Since then, it has been gradually boosting its ownership and combining operations, though an outright merger eluded it because of pressure from Chrysler’s health care trust to float Chrysler’s shares on the stock exchange. Doing so would have destroyed Mr. Marchionne’s vision of a fully merged, global car company with a single listing.
That obstacle was overcome early this month, when the health care trust agreed to sell its 41.5-per-cent stake to Fiat. “Five years ago we began to cultivate a vision that went beyond industrial co-operation to include full cultural integration at all levels,” Mr. Marchionne said on Wednesday. “Today we can say that we have succeeded in creating solid foundations for a global auto maker.”
While the New York listing, and the probable shift of the headquarters to Detroit, was no surprise, it still came as a blow to Italian pride. At one point in the 1970s, Fiat, controlled by the Agnelli family, was Europe’s biggest auto marker and the country’s international corporate star.
Since Mr. Marchionne became Fiat’s CEO 10 years ago, he has slowly but steadily shifted Fiat’s focus away from Europe in general and Italy in particular, where costs are high and sales slow, or even depressed, because of the long recession and terrible productivity. One of its best-selling cars, the tiny Fiat 500 is produced in Poland and Serbia, but not Italy.
“Since Marchionne’s arrival, Italy’s governments and its largest trade union have missed repeated opportunities for a productive dialogue with Fiat as the company has been forced to adapt to changes in the global auto industry,” said Jennifer Clark, the Milan-based author of the 2011 book “Mondo Agnelli: Fiat, Chrysler and the Power of a Dynasty.”
Fiat, which also owns the Ferrari, Maserati and Lancia brands, does not intend to abandon car production in Italy, but will focus on building relatively small numbers of luxury cars. The Maserati factory in northern Italy has already been retooled to build Maserati Quattroporte saloons and Maserati Ghibli sports cars for the export market, largely China and the United States. The factory is expected to produce about 40,000 vehicles in 2014.
Fiat Chrysler is to list in New York later this year, after which Milan will be relegated to a secondary listing.
Fiat’s disappointing earnings are the result of continued weakness in Europe and falling sales in Brazil, where its market lead is under pressure from Volkswagen and the South Korean car makers. Fourth-quarter sales in Brazil were down 18 per cent, far worse than the 3-per-cent decline in the overall Brazilian car market. Latin American trading profit was down 82 per cent to €44-million in the quarter.
Chrysler was the group’s bright spot. Its operating profit in 2013 was $3.2-billion (U.S.) as Jeep sales took off. Chrysler is forecasting a 17-per-cent rise in shipments this year, to 2.8-million vehicles.
Fiat forecast 2014 trading profit at between €3.6-billion and €4-billion for 2014.
The new Fiat-Chrysler group is world’s seventh-largest auto maker. Some analysts expect Mr. Marchionne, who has agreed to remain CEO for three more years, to make another acquisition to boost its chances of global success.