John L. Russell, Associated Press
MILAN — Sergio Marchionne's corporate jet has served a sort of mile-high headquarters as the CEO crisscrosses oceans and continents to integrate and expand Fiat and Chrysler.
But the moment is coming, analysts say, when the high-flying CEO will have to choose a fixed center for the global car business he is building.
The process of choosing a headquarters for what would be the world's seventh largest automaker — based on combined 2010 sales of 3.74 million vehicles — is as politically fraught as any Olympic city bid.
If Marchionne picks Italy, there would be howls of protest from Washington, where U.S. taxpayers put up $12.5 billion to keep Chrysler afloat as it headed into bankruptcy two years ago. The Obama administration put Marchionne in charge of the company, betting on a rescue.
Italian officials and unions, meanwhile, have been fretting for months that Marchionne is slowly transforming Italy's industrial showcase into an American company — which not only would be a loss of prestige for Italy but could also move valuable engineering and management jobs out of the country.
"I think there is tension because there are good reasons to locate the headquarters in Detroit, and there are also good reasons to believe the technical heart of the company is in Turin," said Francesco Zirpoli, an expert on Fiat's manufacturing processes and a professor at Venice's Ca' Foscari University.
Marchionne offered few clues to his thinking when he announced last month a new 22-person group executive council and new corporate structure to accelerate integration. He adeptly sidestepped the issue of a legal headquarters by announcing that the car manufacturing business will be divided into four regional centers, representing distinct markets: North America, Europe, Asia and Latin America.
Marchionne, who will remain the CEO of Fiat, will be chief operational officer for North America, including Chrysler.
That move alone drew cries from Italy's FIOM auto union that the "brains" of the operation were moving to Detroit.
"If someone still had doubts, the actual structure demonstrates where the real management center is: It's not Italy," Giorgio Airaudo of the FIOM metalworkers' union said. FIOM has been challenging Fiat for months on new work rules that Marchionne insists are necessary to guarantee production.
Marchionne himself, however, dodged the question Thursday during an annual conference of industry leaders in Michigan
"The group executive council is a traveling band of nomads. It has to be, so it will spend time in Auburn Hills as it will spend time in Turin. It will spend time in Asia and it will spend time in Brazil," Marchionne said. "It needs to be. It's running a four million car business. It needs to go visit and be physically present."
Many analysts believe Fiat and Chrysler eventually will merge fully — something Marchionne claims is not an urgent priority. At that point, it is logical that Fiat will choose a legal headquarters and list the combined company there, to avoid leaking value in two markets.
"If you have one company, let's assume Fiat autos and Chrysler become one company, then if you have two listings in two countries you have a mismatch in the valuation," said Philippe Houchois, UBS auto analyst. "Marchionne has said it himself: It makes no sense to have one asset and two listings."
But the real heart of the company will not be where it is legally listed and traded — but where the main engineering, design and purchasing functions sit.
The new Group Executive Council comprises 13 managers from Fiat businesses and nine from Chrysler.