Fiat SpA shareholder overwhelmingly approved the merger with Chrysler creating Fiat Chrysler Automobiles N.V.
Just over five years after the Italian automaker effectively took control of bankrupt American manufacturer, Chrysler, shareholders at Fiat SpA have voted their approval of merging the two companies into what they hope is a much more powerful, global automotive firm.
The vote, which came a day after Fiat reported a sharp decline in second-quarter earnings, now triggers several additional steps. The newly formed Fiat Chrysler Automobiles hopes to complete a goal of CEO Sergio Marchionne’s, listing its stock on the NYSE, starting by mid-October.
“With today’s meeting begins the future of our company,” John Elkann, the grandson of late Fiat patriarch Gianni Agnelli and now its chairman, said at the start of the shareholders meeting, likely the last that will be held in Italy.
As part of the new trans-Atlantic company registered in the Netherlands, Fiat and Chrysler will operate together out of a corporate headquarters in Britain. But FCA also plans to maintain separate HQs for each side of the firm in Turin and the Detroit suburb of Auburn Hills, Michigan.
The successful vote doesn’t entirely ensure the merger will be completed. While only about 8% of Fiat shareholders opted against the deal, they now have 15 days to cash in their shares at $10.35 apiece, a 7% bonus over the current market price. If enough do, and the cash-out were to exceed a 500 million Euro, or approximately $700 million threshold, the merger would be called off, at least for the moment.
“If it should go badly, we will come back at another time,” Marchionne told reporters following the shareholders meeting, noting the 500-million Euro ceiling was “the amount I was willing to pay.”
The merger has been more than five years in the making. In early 2009, as the U.S. economy collapsed and both General Motors and Chrysler plunged into Chapter 11 protection, President Barack Obama authorized a bailout for the bigger maker but said he would allow the smaller company to fail if it didn’t find a white knight. Fiat stepped in and Chrysler pulled through with its own federal rescue fund.
They have increasingly operated as a joint company, albeit with limits that CEO Marchionne knew he could eliminate with a full merger. The process hasn’t been smooth, and for awhile it looked like it might be blocked by a dispute between Fiat and the United Auto Workers Union, which held a large chunk of Chrysler stock following the maker’s emergence from bankruptcy.
A New Year’s Day deal resolved that problem and the two makers have since been checking the boxes on the list leading to today’s Fiat shareholders vote.
(Fiat’s quarterly profits plunge 55%. For more, Click Here.)
Prior to their tie-up, they each had serious challenges limiting their ability to compete with the giants of the industry. Chrysler was largely a North American manufacturer, extremely vulnerable to the ups-and-downs of a single market, and unable to benefit from the explosive growth in emerging regions, notably China.
(Click Here for details about July sales results.)
Fiat, meanwhile, was more global, but still geographically challenged. It had pulled out of the key U.S. market, for example, nearly two decades earlier. And its European base, largely on the southern part of the Continent, created other problems, especially during what proved to be Europe’s worst economic crisis in decades. Meanwhile, it didn’t have the volume to match the economies of scale of competitors such as Toyota, Volkswagen, General Motors or Ford.
(To see how banks have impacted the increased auto sales this year, Click Here.)
Chrysler is returning to China. Fiat is back in North America, and FCA now plans to invest about $74 billion over the next five years with a goal of boosting global sales more than 60%, to about 7 million annually. That would be a significant improvement – though it would remain well behind giants Toyota, VW and GM, all three expected to be selling well over 10 million vehicles by then.