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Fiat holds its hard line as talks begin

January 29, 2010

by Guy Dinmore in Rome, Vincent Boland in Milan and John Reed in London

Published on FT on Jan 29 2010

With Italian newspapers headlining “total war” and “blackmail”, representatives of Fiat, the unions and Silvio Berlusconi’s centre-right government meet in Rome today to tackle the car-maker’s production plans and demands for greater worker flexibility.

The mood ahead of the talks soured as Fiat announced it would lay off some 30,000 workers at its five car plants for two weeks from February 22. This followed confirmation of its intention to close its Termini Imerese plant in Sicily next year.

Sergio Marchionne, chief executive of Fiat and manager of Chrysler with a 20 per cent holding, was quoted yesterday as denying union claims of blackmail by announcing the lay-offs ahead of a government decision on how to extend car purchase incentives that kept Fiat afloat in Italy last year. In Detroit with Chrysler, Mr Marchionne is not expected to fly to Rome.
Maurizio Sacconi, minister of labour, complained he had only learned of the two-week shutdown from newspapers and said it would complicate the talks. Although he warned against any “unilateral moves”, commentators say the government holds a weak hand and appears ready to concede closure in Sicily. Recession has also rattled unions’ resolve to take on industrialists and the public sector at the same time.

Fiat is expected to reiterate its plans for manufacturing in Italy over the next few years, with the focus on shifting production of the Lancia Ypsilon from Sicily to Poland, but moving the Panda line from Poland to its plant near Naples.

Luca Cordero di Montezemolo, Fiat Group chairman, sought to defuse the tension yesterday, saying the carmaker was “open” to a dialogue with the government and unions.

Because of its lineup dominated by small cars, Fiat’s performance is linked perhaps more closely than other carmakers to scrapping incentives put in place across Europe to soften the blow of lower consumer demand. Italy’s scheme expired at the end of December and purchases fell sharply this month.

Fiat’s ability to surpass Mr Marchionne’s target of achieving a E1bn trading profit in 2009, which it confirmed when it reported quarterly and full-year earnings this week, was largely down to resilient sales of its 500, Punto, Panda and other models, as well as its market-leading sales in Brazil.

During a year when overall European car sales fell, Fiat’s passenger car sales rose 6 per cent in 2009. Its sales in Italy – its largest market – rose 0.5 per cent. Fiat said that in Italy alone its sales would fall by about 20 per cent if incentives were not available this year.

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