Italian Industry Minister: Fiat must remain an Italian company image

Italian Industry Minister Flavio Zanonato said he asked Fiat CEO Sergio Marchionne to stay in Italy after its planned merger with Chrysler.

“I’ve spoken to [Fiat’s chief executive, Sergio] Marchionne. It was a friendly phone conversation and I told him what I will tell him when we meet face to face: I will ask him for Fiat to stay in Italy and continue being an Italian company,” Mr Zanonato said.

Chrysler and Fiat CEO Sergio Marchionne plans to fully merge the two automakers but until now there were some problems with a United Automobile Workers union health care trust that owns the remaining 41.5 percent in Chrysler. The UAW trust wants more money for a portion of the Chrysler shares it owns than Fiat is willing to pay.
The reason of moving its headquarters outside Italy is mostly because, now, the company is generating more than 50 percent of its operating profit in North America; 75 percent more precisely last year from a total of 84 billion euros in revenue. That’s a huge difference compared to 2004 when Mr. Marchionne was named CEO of Fiat. At that time the company relied on Europe for more than 90 percent of its revenue.

“It makes a lot of sense for Marchionne to list Fiat- Chrysler in the U.S.,” said Erich Hauser, an analyst for Credit Suisse in London. “Refinancing costs are typically lower and aren’t so much subject to the funding costs of sovereign bonds. Also, manufacturers tend to get higher multiples.”

However moving its headquarters outside Italy will not be so easy, and could create a political backlash in debt-ridden Italy, where the entire industrial sector is in decline.

Unemployment in the Italian peninsula remained near a 20-year high in March and almost 15 million people.