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Decision Time for Fiat-Chrysler

On the heels of a successful takeover of Chrysler, Fiat has to decide where it should be based.  CEO Sergio Marchionne is said to be presenting his plan to the Fiat board today. 

While Mr. Marhionne is famous for commuting between Turin, Italy and Auburn Hills, MI., the associated stress and lack of time for either management team it does not aid the creation of a cohesive multi-national enterprise.  Top managers are largely brand and country-specific and the synergies between the two companies could be enhanced.

Political implications could play a strong role in the eventual decision.  Both the Italian and US governments have financially supported Fiat and Chrysler respectively and any suggestion of moving the new global headquarters out of either country will likely cause significant political fallout.  Closely tied to country-specific politics are the issue of labor unions and jobs.  While the pressure to remain in both countries is sure to be great, moving its headquarters to a third location would send a strong message to both Italian and US governments that Fiat-Chrysler is a truly global entity.  And truly global entities are adept at moving production to where it is financially advantageous. 

In addition to politics, tax implications are likely to be a key driver.  Minimizing the tax burden is bound to be a key driver for Fiat-Chrysler.  Were that a sole factor, one could easily envision an administrative corporate headquarter in a tax friendly location such as The Netherlands or United Kingdom.  The company has an existing subsidiary with such a structure, which has been rumored to be a possible model for the company as a whole.

Finally, access to capital might sway the board.  Automobile production is immensely capital intensive and having access to robust capital markets is important for any automaker.  Balancing that access, which could be attained in the US, with minimal tax burdens will prove to challenging. 

Regardless of the board’s eventual decision, labor, capital and governmental interests are likely to be the key decision criteria.

AutoTidbits is Back

Yes, it's true. There has been a rather lengthy and unexplained lack of activity at AutoTidbits. That is no longer the case. The blog is back in business.

A whole host of life-changing events conspired to keep this blog silent. These included a new family member, relocation and a new job. Suffice it to say, the time I spent not writing, was applied in other worthy pursuits.  Now that life has taken on a manageable routine again, I will once again blog about what interests me most – the automotive industry. I am particularly excited about the upcoming Chicago Auto Show.