Fiat (F.MI), Italy’s largest automobile manufacturer, and major producer of P. Diddy commercials, is leaving its Italian home, after 115 years, in a last ditch effort to survive. At its latest quarterly shareholder meeting, stakeholders agreed to merge Fiat with American car company, Chrysler, to form Fiat Chrysler Automobiles. Although Fiat is partnering with an American group, the company plans to move its base of operations to the Netherlands, most likely for tax purposes; and although leaving its home country after many years may feel like betrayal to some, merging with an American company offers Fiat opportunities it wouldn't otherwise be able to pursue.
One indisputable reason for Fiat’s decline relates to the sluggish Italian economy. The economy has contracted 10 of the past 11 quarters, and has seen little to no growth in the past 14 years. With unemployment levels at an all time high, Italy’s economy continues to prove its inability to recover, forcing many Italian citizens to save what little money they can (i.e. not spend on amenities such as cars).
Regardless, Fiat CEO Sergio Marchionne claims he will keep Fiat’s Italian factories open and will rehire about 30,000 workers. In an attempt to maximize profits, Marchionne mentioned he will also build the Jeep Renegade, among other Chrysler models, in these foreign factories. By doing this, Marchionne may also indirectly help revive the Italian economy by creating more jobs. Furthermore, Marchionne’s decision to organize under Deutsche law will undoubtedly make the Fiat Chrysler Automobile group more attractive to investors and bankers, specifically after it’s listed on the New York Stock exchange.
Much like the airline industry, after years of global struggles, the name of the game, when it comes to the automobile industry, is survival. Companies will do anything to stay afloat, even if it means uprooting a century-long tradition (read more here).