Bloomberg News

Fiat May Close Two Italian Factories Without Exports to U.S.

February 26, 2012

Feb. 24 (Bloomberg) -- Fiat SpA may shut two of its five domestic car factories if it can’t produce competitively in Italy and export vehicles to the U.S.

Sergio Marchionne, chief executive officer of Fiat and Chrysler Group LLC, told newspaper Corriere della Sera in an interview that the company must take advantage of a revived U.S. car market since the outlook for the European business is bleak.

“We have everything needed to seize the opportunity to work competitively also for the U.S. market,” Marchionne was quoted as saying. “If it doesn’t happen, then we will have to close down two of the five plants.” His comments were confirmed by a spokesman for Turin-based Fiat.

Fiat, which controls Chrysler with a 58.5 percent stake, closed its Sicilian plant at the end of last year as it seeks to cut costs and improve productivity in Italy after losing 500 million euros ($670 million) in Europe last year in the volume- car business.

European car sales may fall this year for a fifth consecutive year. Marchionne said last month in Detroit that he doesn’t expect a recovery in Europe before 2014 and forecast Italian sales may slump this year to the lowest since 1985. Fiat, which moved back production of its subcompact Panda in Italy from Poland, decided to slow down the introduction of models in Europe because of the “scarcity” of demand, Marchionne told the Italian daily today.

Falling Production

“Vehicle production will keep on falling in Italy and Europe as we don’t see the end of the crisis of car sales in the region,” said Giuseppe Berta, a professor at Bocconi University in Milan, who has written several books on Fiat.

Fiat presented in 2010 a 20 billion-euro plan to boost production in Italy to 1.4 million vehicles a year by 2014 from 650,000 in 2009, in exchange for labor concessions from workers. Production of cars in the country fell 15 percent to less than 500,000 vehicles in 2011, according to carmakers’ association Anfia.

The company introduced a new contract for its Italian workers beginning in January which includes longer shifts and shorter breaks. Fiom Cgil, Fiat’s biggest union, contested the labor deal and said it will sue the Italian company for anti- union behavior.

“Italian plants have the opportunity to export to the U.S.,” Marchione told Corriere. “This is what I’m doing for Italy. I find it unbearably racist being described as an unpatriotic man.”

European Consolidation

The Fiat CEO said last month in Detroit he’s willing to participate in industry consolidation in Europe and would consider adding a third partner before a planned merger between Fiat and Chrysler.

Carmakers in Europe need to consolidate to compete with VW, which had a market share in the region of 23.3 percent last year, Marchionne said Jan. 10. General Motors Co. and PSA Peugeot Citroen are in talks to form a broad partnership as the two automakers struggle with declining car sales in Europe, a person familiar with the discussion said Feb 22.

Marchionne also said in the Corriere interview that an initial public offering of Arbor Hills, Michigan-based Chrysler is the least likely of three options, which include an acquisition of the American carmaker by Fiat and a merger of the two companies. He also reiterated Fiat has no plan to sell its Alfa Romeo division because it “needs the brand” for the U.S. market.

--Editors: Dan Liefgreen, Tom Lavell

To contact the reporter on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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