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Marchionne: Focus, for Fiat's sake

2012-09-19 09:31

FIAT'S HOPES DASHED: Sergio Marchionne speaks at the launch of the new Fiat Panda in March 2012. He has now proclaimed the once-popular mini-car "isn't selling, because there is no market".

MILAN, Italy - Fiat boss Sergio Marchionne will not close car factories in Italy despite a plunging domestic market. He was responding to calls from unions and politicians to clarify a multi-billion euro investment plan.

The chief executive has come under pressure to provide details of Fiat's Italian strategy as the economic recession heightens concerns over job losses at the country's biggest private employer.

'DRASTIC SITUATION'

The company has only earmarked a fraction of the 16 billion euros (R171-billion) for Italian investment outlined in a five-year plan in 2010. Fiat said last week it was unrealistic to expect that a project announced two and a half years ago could remain unchanged.

Marchionne told Rome daily La Repubblica: "We're in a dramatic situation here and I've never talked about plant closures, I've never said I wanted to leave.

"I can assure you that it's a huge responsibility to make these choices today."

Europe's car sales fell by 8.5% in August as demand in recession-hit southern Europe slumped. Ford and General Motors are considering factory cuts in the region.

NEW INFORMATION

The executive, who shuttles back and forth between Detroit, where he manages Chrysler, and Fiat's headquarters in Turin, said the company spent 800-million euros developing a new version of its Panda compact car "but it isn't selling, because there is no market".

The company will release new information about its investments on October 30. So far it has only announced a 2.5-billion euro (R26.8-billion) investment in three plants, two in Turin and one near Naples. A billion euros of that is for new small SUV models and is now on hold pending an upturn in the car market.

Italy's industry and labour ministers have said they want to meet Marchionne for talks, though no date has been set.

'THERE'S NO MARKET'


Nearly 200 000 people work in the auto industry in Italy, according to figures from the International Organisation of Motor Vehicle Manufacturers, compared to about 300 000 in France and in Spain, and about 773 000 in Germany.

Fiat's launch of the new 500L compact car in Italy on September 22 will be closely watched for any signs that demand in the car market is picking up.

Fiat has been forced to idle its factories in Italy, where car sales have fallen back to levels not seen in 40 years. The company is expected to continue to temporarily halt production off and on throughout the fall, union sources told Reuters last week.

But it is investing in the US, where it unveiled 66 new models to Chrysler dealers last week, including plans for a return of the sport Alfa Romeo brand to the United States. It has also started producing a prototype for a new Maserati limousine in Turin, which will be unveiled at the Detroit car show in January and is aimed at the US market.

Fiat's focus on US investment has exacerbated concerns in Italy that it might want to downsize at home.

Marchionne did not discuss financial or market targets in the two-page interview, except to say that the car market in Italy next year will "be very, very bad".

Fiat and its mass market competitors in Europe face a common problem - the continent has too many car factories compared to market demand, but closing them down is costly and politically tense at a time when the economy is weak.

He said his business strategy was to exploit the strong car market in the United States in order to "protect the presence of Fiat in Italy and Europe" where the company has accumulated losses of 700 million euros (R7.5-billion) so far this year. Its business is profitable because of strong growth at Chrysler.

Italian unions say Marchionne should meet with government ministers to reveal his investment plans.

CGIL union leader Susanna Camusso told L'Unita newspaper on Tuesday: "If, as all signs indicate, Fiat is oriented towards cutting production (in Italy), then (the government) should ask itself how to attract another manufacturer."

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