10.02.2011 MARCHIONNE SOFTENS STANCE ON U.S. HEADQUARTERS COMMENTS

LA REPUBBLICA 10 FEBRUARY 2011

The Italian press continues to run the story that Fiat Group might shift its headquarters away from Turin within a few years. This newspaper notice board in Turin this morning sees the daily La Repubblica focusing on Marchionne's public backtracking yesterday.

Fiat and Chrysler CEO Sergio Marchionne has softened his language somewhat after his controversial comments last weekend saying yesterday in Chicago that he must be more open about matters of corporate governance between the two companies and that Italian concerns about a shift away of the powerbase were overblown.

Last Friday Marchionne, speaking at the JD Power Automotive Roundtable conference in San Francisco stirred a hornets nest by telling his audience that Fiat and Chrysler could merge within the "next two or three years" and the new entity's headquarters would most likely be located in North America. Once Chrysler has undertaken a public offering Marchionne doesn't see the need for two separate corporate structures (Fiat is listed on the Milan bourse).

Those comments however caused a wave of reaction in Italy, most notably in Turin, Fiat's hometown for all its 111 year existence, with the city's mayor demanded "immediate clarification", while opposition politicians were quick to blame the government for the situation. Over the weekend Marchionne, along with Fiat Chairman John Elkann, did very little to douse the fires, the hurried line that they spun being that there would in fact be four headquarters globally in the future (in Brazil and Asia as well as Turin and Detroit), a line which was then quickly dropped.

Industry insiders see a merger between the two car companies in the future as being the logical route once Chrysler has accomplished a series of hurdles set when it grasped U.S. and Canadian state government lifelines two years ago as it sank under a tide of debt and collapsing vehicle sales. Foremost is paying these 'taxpayer' loans off, or as is more likely, renegotiating them, before Chrysler follows the recent path of its Detroit rival and Chapter 11 bedfellow in heading for an IPO.

However a softer line has emerged this week from Marchionne who is set to meet embattled Italian Prime Minister Silvio Berlusconi and Economic Minister Giulio Tremonti, Industry Minister Paolo Romani, Labour Minister Maurizio Sacconi and Cabinet Undersecretary Gianni Letta.

In Chicago yesterday for the opening of the auto show where the Chrysler Group's Dodge brand rolled out a series of sports-focused models across its full range, Marchionne said that he must be more open about corporate governance matters between the two companies in the future. And referring to the storm of controversy he set in motion across Italy last weekend he said: "It was a typical overreaction to an honest reflection of the issues that must be dealt with."
 

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