Friday, 17 May 2013

Fiat May Move Headquarters to Detroit, but Motor City Still Needs More Help

by Dale Buss

Fiat is reportedly considering shifting its global headquarters to the Detroit area. That would be a huge material and attitudinal boost for the region in the wake of a new report about the City of Detroit's finances that is even bleaker than before.
When Chrysler was acquired by Mercedes-Benz 15 years ago, effectively moving the headquarters of one of the old American Big Three to Germany, it was yet another body blow to a troubled metro-Detroit area that had already been in decline for decades. When Fiat and the US taxpayer rescued Chrysler (under post-Mercedes owners) from bankruptcy in 2009, at least there was hope of keeping the company, even though its new parent was Italian.
Now, Fiat CEO Sergio Marchionne has signaled strong consideration for moving the worldwide center of the entire Fiat-Chrysler enterprise to Michigan, perhaps to help fill out Chrysler's relatively new headquarters complex in Auburn Hills, Mich., in north-suburban Detroit. Bloomberg reported that Marchionne is evaluating a switch from Turin, Italy, where Fiat was founded in 1899.
"If it materializes, and I hope it does, it's good news," L. Brooks Patterson, the top executive of Oakland County, Mich., home to Chrysler, told Bloomberg. "I think it enhances the entire Motor City image," said the local leader, who's personally wooed Marchionne in Turin. "It is for us a coup, a home run. Actually, a grand slam."
Marchionne himself told analysts last month that "Europe is becoming a less and less relevant fact in the scheme of things" in large part because of the continuing automotive recession there and how that has taxed the resources and resilience of the Fiat brand and enterprise. Europe has declined to just 24 percent of Fiat's revenues now compared with more than 90 percent when Marchionne became CEO nine years ago.
Meanwhile, North America—through Chrysler and its brands—now comprises 75 percent of the combined automotive conglomerate's operating earnings.
It isn't clear how a move to domicile in Detroit would help America's Fiat dealers, many of whomcontinue to struggle with a product line that remains limited for the moment to various versions of the Fiat 500 minicar. Almost all of these dealers were pre-existing Chrysler dealers; and they've been promised a chance to bid on Alfa Romeo-brand products when Fiat begins importing those to the US soon.
In the meantime, many US Fiat dealers say they just can't squeeze enough sales and profits out of endless iterations of the same basic, relatively low-priced nameplate. "I'm struggling to break even," Long Island, N.Y. Fiat dealer Gary Brown told Automotive News. "With the one car in a small (volume) segment, it's a tough go right now."

Of course, nowhere is it a tougher "go" right now than in Detroit, and even a move of Fiat headquarters to a suburb—or perhaps even downtown Detroit, where Chrysler has moved dozens of workers lately—won't do enough to staunch all the red ink that the Motor City has compiled over the decades.
Emergency manager Kevyn Orr, in fact, said just this week that the city's financial obligations, cash-flow shortages and miserably low credit ratings have exacted an even bigger toll on Detroit than grim portrayals from his earlier days as the city's state-appointed financial overseeer and turnaround chief. One of his job qualifications was that Orr had some experience in the 2009 rescue of Chrysler.
"No one should underestimate the severity of the financial crisis," Orr said in a statement issued by his office on Sunday, according to the New York Times. "The path Detroit has followed for more than 40 years is unsustainable and only a complete restructuring of the city's finances and operations will allow Detroit to regain its footing and return to a path of prosperity." Current Detroit Mayor Dave Bing said he won't run for re-election, but he made a good effort to turn around Motown.

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