Fiat Considers Moving HQ to Detroit, Annoys Italians
By Chris Haak
Italian automaker Fiat, which of course has a large ownership stake in Chrysler Group, and which is in the process of planting its Fiat flag on US soil again in the near term, may actually move its global headquarters from its historical base in Turin, Italy to Detroit. Fiat and Chrysler CEO Sergio Marchionne said at a conference last Friday that the company would likely merge Fiat and Chrysler operations within the next two to three years.
Once the operations have been merged, then there is the question of where to headquarter the future merged company. Chrysler obviously has a large presence in the US, and Chrysler sales will make up a sizable portion of Fiat’s global sales, particularly if Marchionne’s aggressive volume and market share targets for Chrysler are met over that timeframe. Based on 2009 numbers, Chrysler’s [depressed] sales would represent about 28 percent of combined Fiat-Chrysler sales, so it’s reasonable. But there’s probably more to it than just headquartering where the sales are.
On the heels of Marchionne’s comments, Italy’s Industry Minister Paolo Romani said in an interview that Fiat “must remain an Italian multinational.” He also went on to state that Turin must not only remain the company’s headquarters, but also remain the center for planning and strategic decisions.
Turin mayor Sergio Chiamparino also said that a move of Fiat’s headquarters to the United States would be unacceptable. Fiat’s Chairman, John Elkann, phoned Chiamparino and explained that the automaker saw the incorporation of various management centers in regions where there is a strong market presence. Those four regions would be Turin, Brazil, Detroit, and possibly Asia if the company’s Asian sales continue to climb. As Fiat’s sales volume grows outside of Europe, the prominence and importance of its home market becomes less important.
Most likely, though, the threat of a move to the United States is simply a negotiating tactic. By holding out the possibilty, Fiat can seek terms that are most beneficial to it from various locales. Maybe Michigan will give Fiat tax breaks, or perhaps a US tax-code revision could lower corporate income tax rates that lower the cost of doing business in the US. Perhaps Marchionne can cut a sweetheart deal with Fiat’s fiesty unions in Italy and gain similar advantages on the homefront. Marchionne is in the midst of pushing a controversial labor deal to boost the notoriously poor productivity of the company’s Italian factories, and his comments could be specifically designed to tweak his counterparty in those negotiations.
Fiat has been asked to explain Marchionne’s comments before the country’s politicians. The stakes are high for Fiat’s future growth and prosperity, so we’ll be curious to see how things turn out. A headquarters move to the US could be a good thing for both Chrysler Group to the US treasury, which might see additional tax revenue flowing in.