Merger sees Fiat largely exiting Italy after 115 years

8/2/2014

TURIN, Italy — Fiat, Italy’s largest manufacturer and a symbol of the country’s struggle to adapt to globalization, is leaving home after 115 years.

The controlling Agnelli family and other investors met Friday in Turin for the last time to seal the end of Fiat as an Italian company after it merges with Chrysler. Created by Italian-Canadian Chief Executive Officer Sergio Marchionne, Fiat Chrysler Automobiles will be incorporated under Dutch law, based in Britain, and listed on the New York Stock Exchange.

“[Mr.] Marchionne doesn’t want to abandon Italy; he wants FCA and himself to be global players, and the center of gravity of FCA has to be repositioned in order to do that,” said Erik Gordon, a professor at the University of Michigan’s Stephen M. Ross School of Business. “It is a little sad for Italy.”

The new entity’s cosmopolitan structure reflects an auto industry shift away from national champions like Fiat, which for decades prided itself in an Italian and Turin heritage. By combining resources with the U.S. carmaker, the company formerly known as Fabbrica Italiana di Automobili Torino can better compete with heavyweights like General Motors, Volkswagen, and Toyota, the CEO said.

Hampered by insufficient reforms, the Italian economy has stagnated over the last 14 years and contracted 10 of the last 11 quarters. Unemployment rates are near record levels, leading thousands of Italians to leave in search of a better future.

The same goes for Fiat. Toughening regulation calls for large sales volumes to finance development of cleaner engines and expansion in growth markets like China and India. Bolstered by the combination, Fiat plans to invest $74 billion in the next five years to boost deliveries 61 percent to 7 million cars by 2018. That’s still less than VW’s target to sell 10 million vehicles this year.

While Italy won’t be completely abandoned, it will become less central. The headquarters will move from a villa adjacent to Fiat’s iconic former Lingotto factory. The new location will be in Slough, England, until Fiat opens a London office by the end of the year. Milan will be relegated to a secondary listing for FCA’s shares.

To take the sting out of the shift, Mr. Marchionne plans to keep administration and information-technology functions in Turin. He’s also vowed to keep all of Fiat’s Italian factories open and rehire about 30,000 line workers.