TURIN, Italy -- Fiat, Italy's largest manufacturer and a symbol of the country's struggle to adapt to globalization, is leaving home after 115 years.
The controlling Agnelli family and other investors, holding their final shareholders meeting here today, sealed the end of Fiat as an Italian company with a vote approving a merger with Chrysler. Created by Italian-Canadian CEO Sergio Marchionne, Fiat Chrysler Automobiles NV will be incorporated under Dutch law, based in the U.K. and listed on the New York Stock Exchange.
"The birth of FCA will end the precarious life of Fiat," Chairman John Elkann, the grandson of late Fiat patriarch Gianni Agnelli, had said before the meeting. "For the first time we have a different perspective: we don't need to play a game of survival."
The merger will create the world's seventh-largest automaker.
Elkann told shareholders today that the Agnelli family will remain committed to the carmaker.
"I want to confirm today my own and my family's commitment to continue to support Fiat Chrysler Automobiles, even more so now that there are big opportunities on the horizon," Elkann said, dismissing talk that the family wanted to sell down its stake.
Elkann said the People's Bank of China owns 2 percent of Fiat Chrysler, making the Chinese central bank one of the group's key investors.
Fiat Chrysler Automobile’s cosmopolitan structure reflects an industry shift away from national champions like Fiat, which for decades prided itself on an Italian and Turin heritage. By combining resources with the U.S. carmaker, the company formerly known as Fabbrica Italiana di Automobili Torino can better compete with heavyweights like General Motors, Volkswagen Group and Toyota Motor Corp., Marchionne says. A brush with bankruptcy a decade ago proved the Italian focus was unsustainable.
"Marchionne doesn’t want to abandon Italy; he wants FCA and himself to be global players, and the center of gravity of FCA has to be repositioned in order to do that," said Erik Gordon, a professor at the University of Michigan’s Stephen M. Ross School of Business. "It is a little sad for Italy."
Vincenzo Longo, an investment strategist at IG Group in Milan, said Marchionne needs the lights of Wall Street, where Fiat Chrysler plans to locate its primary listing by mid-October. There’s more opportunity there than a "peripheral place like the Italian market has become," he said.
Hampered by insufficient reforms, the Italian economy has stagnated over the past 14 years and contracted 10 of the last 11 quarters. Unemployment rates are near record levels, leading thousands of Italians to leave in search of a better future.
The same goes for Fiat. Toughening regulation calls for large sales volumes to finance development of cleaner engines and expand in growth markets like China and India. Bolstered by the combination, Fiat plans to invest 55 billion euros ($74 billion) in the next five years to boost deliveries 61 percent to 7 million cars by 2018. That’s still less than VW’s target to sell 10 million vehicles this year.
There’s little option for Fiat as a stand-alone company. North American operations, which were non-existent before Fiat gained control of Chrysler about five years ago, accounted for 62 percent of the group’s second-quarter operating profit. The manufacturer’s once-core European operations lost 6 million euros, as the saturated market gradually recovers from a two- decade low. Without its U.S. division, Fiat would have been unprofitable in 2012 and 2013.
Failed Opel bid
To reduce its reliance on Italy for sales and as a production base, Marchionne started seeking a partner about 10 years ago, when he took charge of Fiat, which was financially strapped at the time.
The search, which included a failed bid for GM’s Opel unit, wasn’t successful until Chrysler’s 2009 bankruptcy. Faced with the prospect of liquidating America’s third-biggest carmaker, the U.S. government gave Fiat a chance to turn around the Michigan company.
Fiat's headquarters will move from a villa adjacent to Fiat’s iconic former Lingotto factory, which features an oval track on its roof and now houses shops, a hotel and a theater, in a sign that Italy can move on. The new location will be in Slough, England, until Fiat opens a London office by the end of the year. Milan will be relegated to a secondary listing for FCA’s shares.
The London headquarters will have a staff of about 50 people and will be focused primarily on finance activities, two people familiar with the details of the shift told Automotive News Europe in May.
Marchionne and Elkann will be among executives with London offices, one of the sources said.
Marchionne has vowed to keep all of Fiat’s Italian factories open and rehire about 30,000 line workers, who are largely on furlough.
To do that, he plans to build the compact Jeep Renegade as well as other models from the Chrysler brand in Italy. Fiat also intends to expand the upscale Alfa Romeo and Maserati nameplates to compete worldwide with the likes of BMW, Audi and Porsche.
Still, the deal isn’t a cure-all. FCA lacks a sizable presence in China and its Latin American operations are struggling. Even before the Chrysler combination was finalized, Fiat had been linked to mergers or deals with Volkswagen as well as France’s PSA/Peugeot-Citroen in recent weeks. While Fiat has publicly denied talks, the reports reflect investor skepticism about Fiat’s ability to meet its targets, even as Marchionne basks in his fairy-tale deal.
Before Chrysler’s turnaround under Fiat, "we were the poor kids, Cinderella at the ball," Marchionne said in June. "People in the U.S. actually like that. They like what happened."
Marchionne counts on the merger and the U.S. listing to help finance his ambitious 48 billion euro ($64 billion) plan to grow net profit five-fold and sales by 60 percent by 2018.
The merger will not result in any significant operational cost savings or synergies, Fiat has said.
Gilles Castonguay, Bloomberg and Reuters contributed to this reportUPDATED: 8/1/14 8:46 am ET - adds shareholder approval