Via Bloomberg

Fiat Chrysler Automobiles NV, the company that will be formed from the combination of Fiat SpA and Chrysler Group LLC, will be based in London, marginalizing Italy’s role for the automaker.

While Fiat Chrysler had long planned to have a fiscal domicile in the U.K. for tax purposes, it hadn’t selected a specific city. The manufacturer’s presence in the British capital will also be more than just a postal address.

“The board, my office and some of my functions need to operate out of London,” Chief Executive Officer Sergio Marchionne said during a press conference yesterday in Auburn Hills, Michigan.

Fiat, Italy’s largest manufacturer, is reducing its reliance on its home country after buying full control of Chrysler in January. The Turin-based company will have its main stock listing in New York rather than Milan and will be registered in the Netherlands. While Marchionne hadn’t previously specified the city for the headquarters, he said in January that the U.S. had a “large claim” to the site.

Choosing London makes sense for a number of reasons, said John Wolkonowicz, an independent auto analyst. The city is a financial capital and centrally located among Fiat Chrysler’s far-flung operations. It also avoids potential fallout from choosing Chrysler’s base in Michigan over Turin, he said.

Turin Versus Detroit

“If you put it in Detroit, you make Fiat people feel bad, and if it’s in Turin, you make Chrysler people feel bad,” Wolkonowicz said. “This way it’s neutral ground.”

Fiat also stands to benefit from the U.K.’s corporate tax rate declining to 20 percent next year from 21 percent. Income from patents will eventually be as low as 10 percent, offering potential for additional relief. By comparison, Italy’s corporate rate is 31.4 percent.

By not picking Chrysler’s home, the U.S. government would lose out on corporate tax revenue after spending about $7.6 billion to bail out the country’s third-biggest carmaker. The U.K. headquarters would mean Chrysler joins U.S. companies such as Pfizer Inc. and Chiquita Brands International Inc. in contemplating moving corporate addresses abroad to lower bills.

Italy Plan

Fiat will maintain its manufacturing position in Italy with plans to expand production of upscale Maserati and Alfa Romeo cars in its historical home. Marchionne has vowed to keep factories open there, taking the sting out of no longer being the base for the company.

“It doesn’t matter where Marchionne decides to base his office and company’s headquarters since we are interested in him making investments in Italy,” Ferdinando Uliano, head of the Fim Cisl metalworkers union, said in a phone interview today. “Fiat’s business plan is good for Italy and ensures full employment. For now, that’s it.”

Boosting production in Italy is part of Fiat Chrysler’s 55 billion-euro ($76 billion) plan to more than double profit and increase annual deliveries 61 percent over the next five years. Marchionne has personally put his money behind the strategy by buying 130,000 shares for nearly 1 million euros.

The purchase came as investors sold the stock, leading to the biggest drop in more than 2 1/2 years on May 7, because of skepticism that the CEO will be able to meet the 2018 targets. Marchionne said Fiat investors “overreacted.”