Auto giant Fiat's future plans put Italy on edge

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

Fiat will stay in Italy thanks to profits generated abroad, particularly in the United States, the chief executive said amid rising angst that it may be preparing to shed jobs in Italy

Fiat's boss painted a bleak picture of the Italian auto 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.

Sergio Marchionne, who also heads up US auto giant Chrysler, was responding to a furore in Italy after Fiat last week said it would not stick to its previous investment targets and would 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 told La Repubblica daily on Tuesday.

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."

Italian Prime Minister Mario Monti spoke to Marchionne later on Tuesday and the two agreed to hold a meeting on Saturday, where the Fiat boss will inform ministers of the company's plans in Italy, the government said in a statement.

Economic Development Minister Corrado Passera and Welfare Minister Elsa Fornero will also be present, along with Fiat chairman John Elkann -- a scion of the company's founding family and key shareholders, the Agnellis.

Marchionne has been a divisive figure since taking over in 2004 an industrial powerhouse that once symbolised Italy's post-war economic boom.

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

"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," he said.

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

Fornero told La Repubblica that Fiat had "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 auto market has proved worse than expected, with car sales in Italy plunging by 20.2 percent 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 are currently only producing at 50 percent capacity due to the slump in demand.

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 say could be returning.

The company, which was founded in 1899, is most closely associated internationally with its late veteran chairman Gianni Agnelli -- a fashionable playboy and shrewd tycoon who engineered a massive international expansion.

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

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

Antonio Di Pietro, a populist politician and leader of the Italy of Values party, said he was 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.