Iconic US auto maker now Fiat Chrysler Automobiles
By Tom Krisher, The Associated PressGeneral Automotive Automotive Chrysler Fiat merger
Chrysler earnings prop up Fiat’s losses as board re-brands combined US - Italian company.
Fiat’s board of directors agreed on the new name Wednesday, with headquarters for tax purposes in the United Kingdom. But the board sidestepped the thorny political issue of whether the true headquarters would be in the United States or Italy.
Fiat and Chrysler also announced fourth-quarter and full-year earnings. Chrysler’s strong profits once again propped up its parent company, which otherwise would have lost money.
Shares of the combined company will trade jointly on the New York Stock Exchange and in Milan, Italy, by Oct. 1. The shares will trade under the symbol FCA, which also appears on the new company logo. FCA now includes the Jeep, Ram, Dodge and Chrysler brands as well as Fiat, Maserati, Ferrari and Lancia and Alfa Romeo.
The new company will maintain significant research, engineering and financial operations in Fiat’s hometown of Turin, Italy, and at Chrysler’s sprawling office complex in Auburn Hills, Mich. This avoids political controversies in Italy, where Fiat is the largest private employer, and in the U.S., where the government saved Chrysler by funding its 2009 bankruptcy.
Corporate executives, including Sergio Marchionne, CEO of both companies, say the real headquarters is on an airplane. Currently, the 22-member leadership team spends hours on jets flying to meetings and to visit factories and other operations. For at least three years — the amount of time Marchionne has committed to leading the company — “the brains are going to be flying back and forth between Auburn (Hills) and Italy,” said Morningstar analyst Richard Hilgert.
Fiat owned 58.5 per cent of Chrysler last year. It has since bought the rest from a trust fund that pays health care bills for union retirees in order to combine the companies.
Marchionne said the new logo links the two companies “as opposed to retention of one organization over another.” Chrysler and Fiat have already teamed up to design three vehicles, the Dodge Dart compact, Jeep Cherokee SUV and the upcoming Chrysler 200 midsize car.
Marchionne said on a conference call that Fiat and Chrysler leaders are now working in unison. “I think we can move on execution at the speed of light,” he said. Consolidation of the companies, he said, makes him more confident that FCA can reach a goal of selling 1 million Jeeps worldwide this year, up from 732,000 in 2013.
The new company plans to invest 8 billion euros ($10.9 billion) in product development and factories in the coming year as part of a business plan to be unveiled in May.
Chrysler said its net income more than quadrupled to $1.62 billion in the fourth quarter, boosted by strong U.S. sales and a $962 million one-time tax gain. Without the tax benefit, the company still earned $659 million, a 74 per cent increase over a year earlier.
Without earnings from Chrysler, struggling Fiat would have lost 235 million euros ($321 million), nearly double the loss from a year ago.
Chrysler does 75 per cent of its business in the U.S, where sales rose 9 per cent last year to just over 1.8 million cars and trucks, led by the Ram pickup Grand Cherokee. The company sold 2.4 million vehicles worldwide for the year, also up 9 per cent.
Marchionne told Chrysler employees they will get performance awards based on last year’s earnings. The company’s 37,200 blue-collar workers will get about $2,500 in profit-sharing. Chrysler also announced plans to take on up to $4.7 billion in term loans and notes to retire a 2009 note issued to the UAW trust.
Also Wednesday, Fiat’s board of directors scrapped the company’s dividend to maintain liquidity after buying the trust’s stake in Chrysler for $1.75 billion (about 1.35 billion euros) in cash and another $1.9 billion in extraordinary dividends. The deal closed on Jan. 21.
AP Business Writers Dee-Ann Durbin in Detroit and Colleen Barry in Florence, Italy, contributed to this report.
© 2014 The Canadian Press