Fiat Industrial raises Italy exit fears

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Fiat Industrial’s announcement of a merger with its US subsidiary CNH and the listing of the combined group in New York has raised fears that the capital goods company could be on its way out of Italy.

Fiat Industrial will have its primary listing on the New York Stock Exchange and will probably move its domicile and secondary listing to the Netherlands.

But Sergio Marchionne, chairman of Fiat Industrial, brushed aside the issue on Wednesday, saying the move was designed to correct an “anomalous situation” at Fiat Industrial, which accessed capital markets separately from CNH.

“We have been unable to access a proper valuation of these two businesses,” he said, brandishing a chart showing the discount at which CNH trades to peers such as John Deere and Caterpillar, and Fiat Industrial to its rivals Scania, MAN and Volvo. He called on people to take the move at face value, as a simplification without a planned second stage or follow-up transaction.

That has not convinced some trade unions, which have long complained that Fiat is slowly preparing to leave Italy following the division of the industrial units from the automotive operations last year and the potential merger of the latter with its successful Chrysler brand in the US.

“The government should ask for clarity,” said Giorgio Airaudo, national secretary for the Fiom trade union. “The plan to leave Italy has been ongoing for some time. The auto industry is of national interest and for this reason there must be clarity.”

Italy’s government did not immediately comment. However, all issues related to Fiat, the country’s largest industrial company, are closely watched by politicians in and out of the ruling coalition.

“This is a sign of economic development,” commented Renato Brunetta, former minister in Silvio Berlusconi’s last centre-right government and now the party’s spokesman on economic issues. “I am not worried about this at all. It’s a global market.”

Since taking over Fiat in 2004, Mr Marchionne has presided over the biggest organisational changes in the 113-year-old Italian group’s history, while moving its centre of gravity inexorably away from its home base in Turin.

In 2009, he tied Fiat’s auto fortunes to Chrysler, now the cash cow holding up its weaker Italian parent because of strong US auto sales.

Last year he demerged the group’s cars and capital goods businesses, a move that created Fiat Industrial, a separately traded company to go alongside Fiat, which in addition to its own brand also makes Lancia, Alfa Romeo and Ferrari cars.

The Agnelli family, through investment company Exor, owns a controlling stake in both Fiat and Fiat Industrial.

Some market watchers in Italy are worried about what the move would mean for the Italian stock market. Though Mr Marchionne said Fiat Industrial will have a secondary listing in Europe, he did not say it would necessarily be Milan.

“This move is destined to make Italy an ever more peripheral market,” said Gianluca Ferrari, who advises clients at Banca Valsabbina. “Losing a stock of this calibre is not good and is without a doubt damaging for the Italian market.

“Even if the European listing turns out to be in Milan, it will be a secondary listing and that will mean it won’t be very liquid.

“Italian private investors will still buy Fiat Industrial on the Milan market but everybody else will start investing in the US market.”

Additional reporting by Guy Dinmore in Rome

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