Roughly six years ago, Americans waved goodbye to two major Detroit automakers, Chrysler and General Motors. After years of poor business strategy and mismanagement, Chrysler and GM closed their doors and needed a unique bailout to restructure and return to the business world for another try.
Fast-forward to today, and despite GM recalling more than 25 million vehicles in the U.S. alone, both automakers are healthier than they have been in over a decade. That isn't going to save Chrysler from saying goodbye a second time, though.
Fortunately, this time around, Chrysler's goodbye isn't nearly as dramatic, and as it takes place, a new opportunity arises.
Last week Fiat (NASDAQOTH:FIATY) shareholders finally approved the merger of Fiat and Chrysler, to be officially renamed Fiat Chrysler Automobiles (FCA) and incorporated under Dutch law. While the newly merged company will soon list on the New York Stock Exchange, the automaker's headquarters will move to Slough, England, until FCA opens a London HQ office at the end of this year.
Despite the movement of headquarters, FCA is attempting to make as little a splash as possible by being "neutral" between its Chrysler Detroit roots and Fiat's roots in Italy. FCA's new office will be located in London's West End, which happens to be one of the most expensive office districts in the world -- so much for not making a splash.
As Fiat and Chrysler move a handful of top brass to London, FCA CEO Sergio Marchionne has vowed to keep all of Fiat's factories open in Italy, as well as to rehire up to 30,000 workers. Back in the states, Chrysler's setup in Auburn Hills, Michigan, will remain a center for research and development, marketing, and other major processes.
In reality, only about 50 employees will be located in London's headquarters, and the new automaker's roots will remain very much in Detroit.
Still a Detroit automaker at heart
With FCA's merger officially approved, it has created the seventh largest global automaker. However, FCA also has major work to do to catch any of its top rivals. FCA has laid the road-map strategy to try to climb the global ranks by increasing global sales 60% to 7 million vehicles by 2018 -- a significant jump from the 4.4 million units sold in 2013.
"The execution of the (Fiat Chrysler Automobiles) business plan announced on May 6 depends on the fact that the U.S. operations perform well," Marchionne said at a business event in Trento, Italy, back in June, according to Automotive News.
While FCA's headquarters will soon be traveling to London, make no mistake: This automaker has a future solely because of its Detroit roots. Without Chrysler, Fiat would have been unprofitable in each of the last two years, and its global plan going forward is going to be very reliant on Chrysler's surging Jeep brand.
Jeep was the world's No. 1 SUV brand through 1990, but has since slipped to the world's sixth-largest SUV brand by 2013. Going forward, if its recent sales surge in the U.S. is any indication, Jeep will have a chance to reclaim its top spot globally, and FCA plans for Jeep's sales to increase from 732,000 last year to 1.9 million in 2018.
Ultimately, Americans really shouldn't think of this development as saying goodbye to Chrysler -- it's simply a new office in London while its operations in Auburn Hills remain much the same. When FCA's shares are listed on the New York Stock Exchange on Oct. 13, it will give the automaker capital to execute its ambitious global turnaround plan. Right at the heart of that turnaround plan, and hauling in the majority of profits, will be the same Chrysler Detroit automaker that has been surging, on the back of its popular Jeep and Ram truck brands, since the Great Recession.