Could Fiat/Chrysler CEO Marchionne Say, “Ciao” to Italy?

Exec to discuss “strategic prospects” with Prime Minister.

by on Sep.20, 2012

Fiat Chief Executive Marchionne will be meeting with Italy's prime minister to discuss his strategic options over the weekend.

Might Fiat pull up its stakes and abandon its home base? That’s a very serious possibility, some European analysts are speculating, as the maker’s CEO Sergio Marchionne prepares for a meeting to discuss “strategic prospects” with Italian Prime Minister Mario Monti.

The Canadian-educated Marchionne – who has shown increasing frustration with both the broad European financial crisis and, in particular, the cost of doing business in Italy – has been hinting at such a radical move for several years.  Analysts say he is in a particularly good position to hold out that threat because of Fiat’s increasingly strong ties to Detroit-based Chrysler Group, where Marchionne also serves as CEO.

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In an interview with one of Rome’s leading papers, the executive downplayed such a radical move but observers continue to wonder what other “strategic prospects” could come up at the planned meeting with Prime Minister Monti on Saturday.

In a media roundtable late last month, Marchionne expressed clear frustration with the European situation, noting that “no one wants to go first” and make the necessary cuts that might rationalize an industry with massive over-capacity.  But he quickly added that individual European governments also had to be held responsible for trying to protect their national automakers rather than accepting the need to act quickly as industry-wide losses continue to mount.

Marchionne has repeatedly faulted both the Italian government and the country’s automotive unions and last year gave organized labor an ultimatum to cut costs or see new Fiat investments go elsewhere.  The Fiat/Chrysler CEO won some concessions, notably including approval to close an under-utilized factory in Sicily.  But he appears to be seeking substantially more.

For those who think Marchionne is over-stating his case, “Blustering is not the word I’d use,” said Iain Carson, long-time automotive correspondent for the London-based newsmagazine The Economist.  “He’s after concessions and seems to be gradually getting them.”

For his part, Marchionne downplayed the threat of leaving Italy when speaking to the Rome-based La Repubblica, telling the daily paper, “In this dramatic situation, I have not spoken about firing, I have not proposed closing plants, and I have never said I wanted to go away.”

But Carson believes Marchionne very well could pull Fiat out of Italy.  The Italians, he says, “underestimates how ruthless he is.”

Among the executive’s apparent goals, he hopes to get approval to bargain new contracts at the individual plant level rather than having to negotiate a national agreement.  That could help him bring down costs enough to allow production of some U.S. models at under-utilized Fiat plants for export around the world.

The maker is feeling pressure for change mount every month, industry experts warn, noting that the European market is steadily worsening as its economic crisis remains unsolved.  In August, Fiat sales plunged another 8.5% with little prospect for a turnaround any time soon.

Barring any big changes, Turin-based Fiat remains Italy’s single largest employer and its most important industrial concern.

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