Chrysler mini-vans sit on the lot at Suburban Chrysler Dodge Jeep Ram of Troy, Michigan on Wednesday, the dayChrysler got a new name -- Fiat Chrysler Automobiles. (Brandy Baker / The Detroit News)
For the second time in two decades, Auburn Hills-based Chrysler has been absorbed by a European automaker to form a new, global car company: Fiat Chrysler Automobiles NV, or FCA.
The board of directors of Italy’s Fiat SpA, which completed its acquisition of Chrysler earlier this month, announced the formation of the new company Wednesday. It said FCA will be incorporated in the Netherlands and registered in the United Kingdom for tax purposes, but will continue to be run by a management team working out of Fiat’s headquarters in Turin and Chrysler’s headquarters in Michigan.
Fiat’s shares will convert into stock in the FCA, which will continue to trade on the Mercato Telematico Azionario in Milan, but the company also plans to begin trading shares on the New York Stock Exchange by October.
“A new chapter of our story begins with the creation of Fiat Chrysler Automobiles,” said John Elkann, chairman of Fiat, in a statement released Wednesday. “A journey that started over a decade ago, as Fiat sought to ensure its place in an increasingly complex marketplace, has brought together two organizations, each with a great history in the automotive industry and different but complementary geographic strengths.”
Chrysler’s iconic Pentastar logo will not be part of that new chapter. Both it and the Fiat logo will be replaced with a new corporate insignia — the stylized letters F, C and A — over the next several months.
It is the second time the Pentastar has fallen in the past 15 years. Daimler-Benz AG replaced it with an older Chrysler logo when it acquired control of the company in 1998. The Pentastar was revived after the German automaker sold Chrysler to Cerberus Capital Management LP in 2007.
Fiat acquired a controlling stake in a bankrupt Chrysler in 2009 as part of a bailout deal brokered by the Obama administration. Since then, the Italian automaker gradually increased its stake in the company, culminating in a Jan. 1 deal to acquire the remaining shares from a United Auto Workers retiree health care trust.
“(Today) we have closed a remarkable chapter in Chrysler’s proud history,” CEO Sergio Marchionne said in a message to Chrysler workers Wednesday. “Your courage and passion have restored Chrysler to being a competitive force in the auto industry and have created a strong partner with Fiat in building an exciting new global venture.”
Marchionne told analysts and reporters that the plan approved by Fiat’s board will remove “all the complexity of trying to run two separate organizations with two separate governance systems” and allow him to create “the world’s seventh-largest automaker” — one with the scale and scope necessary to compete in the global automobile business.
The decision to incorporate the newly merged company in the Netherlands was widely anticipated, and executives stressed that it would have no impact on employment in Auburn Hills or Turin. They pointed out that Chrysler, like many American corporations, was actually headquartered in Delaware.
Claiming tax residency in the United Kingdom is an increasingly common practice because it offers more streamlined accounting rules for foreign-controlled companies. FCA will continue to pay taxes in the United States and other countries in which it does business.
“This is the trend of the future. It is more and more the shape of business today,” said professor Aneel Karnani of the University of Michigan’s Ross School of Business. “Companies are losing this idea of a nationality. Saying what country a company is from is becoming more and more difficult and ambiguous.”
Marchionne, who likes to say he lives on airplane, has said the legal headquarters of the new company is “irrelevant” as far as employees are concerned. But the decision to move its legal domicile out of Italy will deal a major psychological blow to that country, which still sees Fiat as the backbone of its manufacturing sector.
Turin-based journalist Paolo Griseri, who covers Fiat for the Italian newspaper La Repubblica, told The News that far left and conservative parties are accusing Marchionne of abandoning Italy in favor of the United States. But he said more moderate elements say it does not matter where the company is registered as long as the merger leads to more work for Fiat employees, many of whom have been idled by poor sales in the European region.
Shares in FCA will continue to be traded in Italy on the Milan exchange. Under the proposal approved by the Fiat board, Fiat shareholders will receive one FCA common share for each Fiat share they hold.
The restructuring still needs to be approved by those shareholders.
“In order to foster the development and continued involvement of a core base of long-term shareholders, FCA will adopt a loyalty voting structure, under which Fiat shareholders who are present or represented by proxy at the Fiat shareholder meeting called to vote on the proposal and who continue to hold their shares until the closing, regardless of how they vote, are eligible to receive special voting shares equivalent in number to the newly-issued FCA common shares they receive,” the company said. “After the closing, shareholders who hold their FCA common shares for at least three years would also be entitled to participate in the loyalty voting structure.”
The board said FCA shareholders will be eligible for loyalty voting until they transfer their shares.
Marchionne said he hopes the restructuring can be completed by the end of the year, but said the merger has already taken place inside the company.
“The team now is working in unison,” he said, adding that this has been the case for some time.
That team will present a long-term business plan for FCA to the financial community in May.
“Our future is bright if all of us in this combined group continue to embrace common values including meritocracy, accountability and the willingness to embrace competition,” Marchionne told workers. “We need to focus on building a common future and to remove any vestiges of thinking that involves ‘us’ and ‘them.’ I ask you to continue bringing your skills and determination to make this next chapter the most rewarding one ever.”