As Fiat Struggles in Europe, Automaker's Future Plans Put Italy on Edge

Sept. 18, 2012
There is rising concern in Italy after Fiat last week said it will not stick to its previous investment targets and will unveil a new strategic plan next month.

Fiat SpA (IW 1000/48) CEO Sergio Marchionne painted a bleak picture of the Italian automotive market but said the historic brand will stay in the country, amid union warnings that Italy's top private-sector employer is set to shed jobs.

Marchionne, who also heads Chrysler Group LLC, was responding to rising concern in Italy after Fiat last week said it will not stick to its previous investment targets and will unveil a new strategic plan next month.

"Fiat has accumulated losses of 700 million euros ($916 million) in Europe and is supporting these losses thanks to success in the United States and emerging markets," Marchionne said in an interview with La Repubblica daily.

Of the 3.5 billion euros in operating profit Fiat expects this year, none of it will come from Italy, where there has been a collapse in sales, he said.

Asked if he saw any light at the end of the tunnel, Marchionne responded: "I don't see anything until 2014. That's why investing in 2012 would be lethal."

"I am trying to profit from the recovery of the American market, exploit it to the maximum, to attain the financial security that would allow me to protect the presence of Fiat in Italy and in Europe at this dramatic moment."

Plant Closures Imminent?

Social Welfare Minister Elsa Fornero earlier said she had requested "urgent talks" with Marchionne, a divisive figure in charge since 2004 of the company that once symbolized Italy's postwar economic boom.

Marchionne over the past few years has forged a partnership with once-troubled Chrysler, which is now propping up Fiat's results.

But the chief executive's orientation toward the United States and his repeated barbs against Italy have sparked anger in Fiat's heartland.

Fornero told La Repubblica that Fiat has "a duty" to explain itself, adding that Marchionne "owes this not so much to the government or the shareholders but to Fiat workers and to the thousands of families that depend on it."

Fiat employs a total of 197,000 people, including around 80,000 in Italy.

"Fiat has done so much for Italy but it also has responsibilities towards this country. We would like it to bear that in mind," Fornero said.

But she cautioned that "the government cannot impose its choices on a private company" -- unlike the French government, which has raised its hackles at Peugeot's plan to close a landmark plant near Paris and shed 8,000 jobs.

The crisis in the country's automotive market has proven worse than expected, with car sales in Italy plunging by 20.2% in August on a 12-month comparison.

Trade-union leaders are already warning that Fiat could be preparing to announce the closure of one or more of its five plants in Italy, which currently are producing at 50% capacity due to the slump in demand.

Italy 'Has Given a Lot to Fiat'

Fiat's history has reflected the downs as well as the ups of Italian industry and it became an important hub of trade-union militancy and violent protests in the 1970s and 1980s -- a period that some fear could be returning.

The company, which was founded in 1899, is most closely associated internationally with its late veteran chairman

Gianni Agnelli -- a playboy and shrewd tycoon who engineered a massive reform of the company's management and international expansions.

Marchionne, meanwhile, has come under growing criticism from his peers, with fashion billionaire Diego Della Valle on Friday criticizing his "bad decisions" that go against "the interests and the needs of the country."

Italy "has given a lot to Fiat -- maybe too much," Della Valle said.

Giorgio Squinzi, head of the Italian employers' federation Confindustria, also chimed in, saying Italy cannot afford to lose its auto industry.

"We should not forget that behind the auto industry there is a huge business for many companies that keeps the sector competitive," he said.

Antonio Di Pietro, a populist politician and leader of the Italy of Values party, said he is saddened that "people like Marchionne take money and resources from the country and do what they want with them."

"Italy needs industrial giants like the Fiat of yesteryear," he said.

Copyright Agence France-Presse, 2012

By Amelie Herenstein, AFP

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Agence France-Presse

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