Fiat firestorm

Sergio
Marchionne, chief executive of Fiat and Chrysler, has been forced on the
defensive after causing a political firestorm in Italy by suggesting he could
move the Italian company’s headquarters from Turin to the US and saying Chrysler’s
bail-out loans from the US government carried “shyster rates”.

His
comments come just a month after he won tough labour concessions at Fiat’s
flagship Turin plant on a pledge that he would not move production to cheaper
sites in North America or Eastern Europe.

Fiat
is a symbol of Italy’s industrial might, and business leaders say any decision
by Mr Marchionne to reduce its presence there would have a disastrous effect on
the country’s already weak image as a place for foreign investment.

Pierluigi
Bersani, leader of the opposition Democratic Party, demanding an explanation
from Mr Marchionne said it was unacceptable for “Turin and the country to
become a suburb of Detroit”.

 John Elkann, Fiat chairman, sought to calm
tension, telling Turin’s mayor that the city would remain a European headquarters
of Fiat in any merger with Chrysler.

Speaking
at the JD Power forum in San Francisco on Friday, Mr Marchionne said that in
“two or three years” Fiat could merge with Chrysler and move its
headquarters to the US.

Fiat
said only that Mr Marchionne spoke in his capacity as Chrysler chief executive.

Even
so, top bankers familiar with Fiat expect Mr Marchionne, who has made no secret
of his frustration with Italian bureaucracy and labour relations, to seek to
slim down operations in Italy and lead the group from the US.

In
a separate statement by Chrysler, Mr Marchionne sought to douse anger over his
pejorative term “shyster rates” on US government loans, saying he
regretted those remarks.