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Fiat Sparks Italy Worries With Possible Headquarters Move
Fiat SpA (F)’s deliberations over moving its headquarters to the U.S. after a merger with Chrysler Group LLC. sparked concern among Italian unions and politicians about the plans of the country’s biggest manufacturer.
Chief Executive Officer Sergio Marchionne is evaluating a switch to the U.S. from Turin, where Fiat was founded in 1899, three people familiar with the matter said. The CEO is considering the move because Fiat’s main sources of revenue and profit are shifting to North America, with 75 percent of 2012 operating earnings coming from the region.
No final decision on the headquarters has been made and other options are being examined, the people said. Marchionne said last month that he favored a primary listing in New York for the company.
“We ask the government to urgently open a formal discussion to face the crisis in the auto sector,” Michele De Palma, a leader of Fiom union, said in a statement. “Fiat is relocating abroad.” Fiom was the only union which opposed the the automaker’s current contract.
Politicians and labor leaders spoke out against Fiat shifting its headquarters away from Turin’s iconic Lingotto, a former car plant with an oval track on its roof, after Italian media, including Corriere della Sera, La Repubblica and Ansa, cited the story first reported by Bloomberg. The backlash in the debt-ridden country, where the industrial sector is in decline, prompted a response from Fiat.
The headquarters issue is “not on its agenda now,” the carmaker said late yesterday in a stock-exchange statement. Fiat, citing the Bloomberg story in it remarks, said no decision has been made on the matter. The automaker had declined to comment prior to Bloomberg publishing its story.
Talk of the potential shift is especially sensitive in Italy, where 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 wouldn’t be good news,” Carlo Dell’Aringa, a Labor Ministry undersecretary, said in a televised interview with Sky Tg24 yesterday. “Even if moving the headquarters to the U.S. doesn’t mean abandoning plants and production, it would be a step that will harm the future of the company in Italy.”
The shares dropped as much as 15 cents, or 2.8 percent, to 5.23 euros, and were down 2.1 percent as of 11:14 a.m. in Milan trading. The stock has gained 39 percent this year, valuing the company 6.58 billion euros ($8.47 billion).
Fiat’s dependence on Europe has been reduced 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.
Chrysler has become the Fiat-Chrysler group’s profit generator as Fiat struggles to end losses in Europe, which totaled more than 700 million euros last year. Fiat’s market share in Europe fell to 6.4 percent through April from 6.5 percent a year earlier.
“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.”
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.
Fiat will keep its European headquarters at the Lingotto building, which opened in the 1920s after founder Giovanni Agnelli visited Ford Motor Co.’s Detroit-area plants, the people familiar with the deliberations said. Auto production at the complex stopped in the 1980s.
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.
Although moving the headquarters “doesn’t look good for the company, what we care about is that Fiat will keep its plants” in the country, Ignazio Abrignani, deputy chairman of parliament’s economic activities, trade and tourism committee, said in a statement late yesterday.