MILAN, Nov 27 (Reuters) - Sergio Marchionne, chief executive of carmakers Fiat and Chrysler, will outline a restructuring of production in Italy to the government next week as he hopes to secure a commitment for continuing tax breaks on new cars.
The proposals will include halting car production at its vulnerable Sicilian plant and possibly job cuts, increasing tensions with politicians and trade unions.
Fiat has five auto plants producing solely its marques -- Fiat, Lancia and Alfa Romeo -- in Italy, employing around 26,000 workers, and a joint venture site with France's Peugeot.
Fiat said in June its Termini Imerese plant in Sicily would halt its car production -- the Lancia Ypsilon -- by 2011, to be replaced by some other output which has not yet been specified.
Marchionne has said many times that Europe's car industry needs to cut production to face the slump in demand triggered by a global credit crunch that has crimped consumer spending.
Sales this year in Europe and Italy have found support in incentives to buy less-polluting cars from governments desperate to maintain jobs in the industry, but these are coming to an end and in Italy will cease after Dec. 31.
Car sales in Italy contained falls to just 3.87 percent in the first 10 months of the year, according to figures from the Transport Ministry. November figures are due on Dec. 1.
Marchionne thinks a gradual phase-out of the tax breaks over two years -- a 'foam on the runway' scenario -- would be preferable to a sudden halt that would slash sales.
Unions have already said the government should not extend the incentive scheme if Fiat completely closes Termini Imerese and Industry Minister Claudio Scajola, who is meeting Marchionne on Tuesday, has said it would be 'folly' to shut the plant.
FIGURES DON'T ADD UP
That triggered a sharp retort from Marchionne on Thursday.
'In my personal experience, before you use an extreme word like folly, you should know the figures. Once you know the figures, maybe you will come to a different conclusion,' he told journalists in Turin.
Scajola admitted in a letter to Il Giornale newspaper on Friday that it cost up to 1,000 euros more per car to produce vehicles in Sicily. The island's poor infrastructure and weak links to markets hamper the plant's economics.
'Termini Imerese is too small, there are no scale economies, it's inconvenient for suppliers and it's inconvenient for Fiat,' said Pierluigi Bellini, a director at IHS Global Insight.
Rival General Motors has said it could cut up to 10,000 jobs as part of its European restructuring as it moves to reduce production across Europe by up to 25 percent.
Fiat's plans are expected to include shifting production of the new version of the Lancia Ypsilon to its plant in Poland, analysts say.
But to do that, Fiat will need to take some pressure off the Tychy, Silesia, plant -- which is currently running six days a week and producing around 2,300 cars a day.
Media reports and analysts suggest that Fiat could shift about half its production of Panda models from Poland -- around 270,000 vehicles annually -- to its Pomigliano d'Arco plant near Naples in southern Italy.
That plant has a workforce of 5,000 and currently produces Fiat's up-market and sporty Alfa Romeo models, which have higher margins than the Panda. In June, Fiat said the plant would stop producing the Alfa 147 and the GT in 2010.
'It wouldn't make sense to move all the Panda production to Italy. Aside from political or social reasons, I don't see a commercial reason,' Bellini said.
But Marchionne may be planning to get more out of his Italian workers -- and job cuts have not been ruled out although they are unlikely to be drastic. He hinted last week that workers in Italy would have to increase productivity.
'We have six sites in Italy which produce the equivalent of one factory in Brazil. What kind of industrial logic is that?' he said.
Fiat does not give details of production at individual plants. Its main Brazil plant, which produces Fiat models, employs 8,700 workers. Fiat produced nearly 624,000 cars in Brazil in the first 10 months of this year.
Earlier this month, La Repubblica newspaper said Fiat planned to boost Italian output about 40 percent to 900,000 units a year.
(Reporting by Gianni Montani and Jo Winterbottom) Keywords: FIAT PLANTS/ (jo.winterbottom@thomsonreuters.com; +39 02 66129 442; Reuters messaging: jo.winterbottom.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The proposals will include halting car production at its vulnerable Sicilian plant and possibly job cuts, increasing tensions with politicians and trade unions.
Fiat has five auto plants producing solely its marques -- Fiat, Lancia and Alfa Romeo -- in Italy, employing around 26,000 workers, and a joint venture site with France's Peugeot.
Fiat said in June its Termini Imerese plant in Sicily would halt its car production -- the Lancia Ypsilon -- by 2011, to be replaced by some other output which has not yet been specified.
Marchionne has said many times that Europe's car industry needs to cut production to face the slump in demand triggered by a global credit crunch that has crimped consumer spending.
Sales this year in Europe and Italy have found support in incentives to buy less-polluting cars from governments desperate to maintain jobs in the industry, but these are coming to an end and in Italy will cease after Dec. 31.
Car sales in Italy contained falls to just 3.87 percent in the first 10 months of the year, according to figures from the Transport Ministry. November figures are due on Dec. 1.
Marchionne thinks a gradual phase-out of the tax breaks over two years -- a 'foam on the runway' scenario -- would be preferable to a sudden halt that would slash sales.
Unions have already said the government should not extend the incentive scheme if Fiat completely closes Termini Imerese and Industry Minister Claudio Scajola, who is meeting Marchionne on Tuesday, has said it would be 'folly' to shut the plant.
FIGURES DON'T ADD UP
That triggered a sharp retort from Marchionne on Thursday.
'In my personal experience, before you use an extreme word like folly, you should know the figures. Once you know the figures, maybe you will come to a different conclusion,' he told journalists in Turin.
Scajola admitted in a letter to Il Giornale newspaper on Friday that it cost up to 1,000 euros more per car to produce vehicles in Sicily. The island's poor infrastructure and weak links to markets hamper the plant's economics.
'Termini Imerese is too small, there are no scale economies, it's inconvenient for suppliers and it's inconvenient for Fiat,' said Pierluigi Bellini, a director at IHS Global Insight.
Rival General Motors has said it could cut up to 10,000 jobs as part of its European restructuring as it moves to reduce production across Europe by up to 25 percent.
Fiat's plans are expected to include shifting production of the new version of the Lancia Ypsilon to its plant in Poland, analysts say.
But to do that, Fiat will need to take some pressure off the Tychy, Silesia, plant -- which is currently running six days a week and producing around 2,300 cars a day.
Media reports and analysts suggest that Fiat could shift about half its production of Panda models from Poland -- around 270,000 vehicles annually -- to its Pomigliano d'Arco plant near Naples in southern Italy.
That plant has a workforce of 5,000 and currently produces Fiat's up-market and sporty Alfa Romeo models, which have higher margins than the Panda. In June, Fiat said the plant would stop producing the Alfa 147 and the GT in 2010.
'It wouldn't make sense to move all the Panda production to Italy. Aside from political or social reasons, I don't see a commercial reason,' Bellini said.
But Marchionne may be planning to get more out of his Italian workers -- and job cuts have not been ruled out although they are unlikely to be drastic. He hinted last week that workers in Italy would have to increase productivity.
'We have six sites in Italy which produce the equivalent of one factory in Brazil. What kind of industrial logic is that?' he said.
Fiat does not give details of production at individual plants. Its main Brazil plant, which produces Fiat models, employs 8,700 workers. Fiat produced nearly 624,000 cars in Brazil in the first 10 months of this year.
Earlier this month, La Repubblica newspaper said Fiat planned to boost Italian output about 40 percent to 900,000 units a year.
(Reporting by Gianni Montani and Jo Winterbottom) Keywords: FIAT PLANTS/ (jo.winterbottom@thomsonreuters.com; +39 02 66129 442; Reuters messaging: jo.winterbottom.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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