Why Daimler should have more faith in Italy
|Luca Ciferri is Editor-in-Chief of Automotive News Europe.|
Daimler is one of the companies bracing itself against Italy's possible exit from the euro. The controversial move comes at a tense time for the country, where taxes rose to a record 45 percent of gross domestic product last year just so Italy could remain in the 17-nation monetary union.
Daimler included provisions to hedge against Italy's potential departure from the euro in documents covering 150 million euros of notes sold this week by its Mercedes-Benz Financial Services Italia unit, according to a Bloomberg report.
The automaker stipulated that principal and interest payments on the floating-rate notes due August 2015 will be made in "the legal currency in Italy" when due, the report said. This differs from the typical documentation for debt issued by companies from the nations that use the euro.
Daimler's move comes ahead of Italian elections that could result in a hung parliament if former premier Silvio Berlusconi can continue to narrow his deficit against front-runner Pier Luigi Bersani.
Bersani is determined to keep the euro while Berlusconi wants to stop using the currency. Berlusconi is also promising tax rebates to austerity-hit voters and said he wants to give amnesty to tax evaders.
While Daimler has a right to protect itself, the message to the average person in the eurozone's third-biggest economy is that the company is betting on Italy to fail financially. That hurts, considering the painful sacrifices that Italians have made to stay in the eurozone. Hopefully other foreign auto companies will have more faith in the country.
The biggest losers could be dealers selling Daimler's Mercedes-Benz and Smart brands in Italy. Last year 51,000 Mercedes vehicles and 24,000 Smarts were sold in Italy. A return to a weak lira could decimate Mercedes and Smart sales because most people would no longer be able to afford those cars.
You can reach Luca Ciferri at email@example.com.