Crisis at Fiat Auto worsens

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Faced with mounting financial difficulties in its automobile division, in October 2002, the Italian industrial group Fiat announced a new restructuring programme, only months after launching an earlier plan. The latest measures could result in 8,100 employees losing their jobs at Fiat Auto. The trade unions have been highly critical of the plan and have begun to mobilise for industrial action.

In May 2002, the Fiat industrial group announced a restructuring programme (IT0206101N) prompted by the poor financial results of Fiat Auto, its automobile division. In July 2002, an agreement was signed by the management and some trade unions which contained measures aimed at tackling the crisis (IT0208102N). On the union side, the deal was signed by the Italian Metal-Mechanical Federation (Federazione italiana metalmeccanici, Fim), affiliated to the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl), and the Union of Italian Metal-Mechanical Workers (Unione Italiana Lavoratori Metalmeccanici, Uilm), affiliated to the Union of Italian Workers (Unione Italiana del Lavoro, Uil). The Italian Federation of Metalworkers (Federazione Impiegati Operai Metallurgici, Fiom), affiliated to the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), did not sign.

However, Fiat Auto's difficulties had worsened even further by the beginning of October 2002. In the month of September, Fiat Auto's sales decreased by 3.4%, a drop that continued the downward trend of the first eight months of 2002, when Fiat Auto recorded an overall fall of 18.2% on the previous year. Therefore, albeit in a sector whose economic performance has generally been poor in 2002, that of Fiat Auto has been worse than that of its main competitors.

The crisis has had a negative impact on the financial situation of Fiat Auto. Losses in 2002 are predicted to be around EUR 1.5 billion, almost the same amount as the recapitalisation of its automobile division undertaken by Fiat in the summer of 2002.

The new Fiat plan

The severity of the crisis has induced Fiat management to draw up a new restructuring plan which is even more stringent than that launched in July 2002. The new plan was first presented to Prime Minister Silvio Berlusconi and the Minister of the Economy, Giulio Tremonti, at the beginning of October 2002, and then to the trade unions.

The plan’s main objective is to cut costs and thereby revive Fiat Auto’s profitability. It also seeks to strengthen the alliance with the US-based General Motors, with which Fiat has a partnership agreement (IT0004151F). This should lead to the production of new models in market segments where Fiat is currently under-represented. Fiat also envisages making investments in the reorganisation of its distribution network.

The restructuring plan announced by Fiat has major negative implications for employment. Around 8,100 workers will be affected. The company intends to lay off workers by temporarily using the Wages Guarantee Fund (Cassa integrazione guadagni) for around 7,600 and 'mobility lists' for a further 500 workers employed mainly in its components division - these are two of the 'social shock absorber' measures that cushion the effects of restructuring and redundancies (IT9802319F). For this reason, Fiat intends to ask the government to declare a 'state of crisis'. In more detail, at least on the basis of newspaper reports, the Wages Guarantee Fund will be used for around 5,000 workers at Fiat Auto and for 600 in the components division, for one year starting from December 2002. Application for a further 2,000 workers to be placed on the Wages Guarantee Fund will be made in July 2003. The restructuring plan will concern all the Fiat Auto plants except the one in Melfi in the region of Basilicata (South Italy).

Another key issue is Fiat Auto’s financial situation. It was initially proposed that the state should participate in Fiat Auto’s capital through a state-owned company. However, this proposal was rejected by both the leading Italian banks which had made a large loan to Fiat in July 2002, and by General Motors. Moreover, the form that eventual participation by the state may take must be specified more clearly, given that it has to conform with the EU rules on competition.

Still to be clarified is the fate of the alliance with General Motors, which could lead to the takeover of Fiat Auto by the US-based multinational in 2004.

Trade union reactions

The crisis at Fiat Auto has been a cause of great concern both at the political level and for the trade unions. On 17 October 2002, during a meeting between the government and the unions, it was decided that tripartite talks involving the government, the unions and Fiat would be opened.

However, the unions have jointly and repeatedly expressed their opposition to the restructuring plan proposed by Fiat, in view of its damaging effects on employment. In a press release issued on 15 October, Fim-Cisl, Fiom-Cisl and Uilm-Uil stated that the plan did not go far enough in resolving the Fiat Auto crisis. It was claimed that, in fact, the solutions proposed would lead to the dismemberment of the automobile sector in Italy, with damaging effects in terms of both employment and industrial development. For this reason a new plan should be drawn up.

According to the unions, tackling the Fiat crisis requires direct intervention by the state designed to consolidate and relaunch the automobile sector, and a substantial commitment of financial resources by the present owners. They also maintain that lay-offs on the 'zero-hour' Wages Guarantee Fund are unacceptable because they would be the prelude to closure of the plants involved in the restructuring, with the consequent dismissal of the workers concerned.

Industrial action has already begun in Fiat plants, with strikes and demonstrations. A general strike by metalworkers was to be announced before the middle of November 2002.

Commentary

The crisis at Fiat Auto has a significance that extends beyond the company, given the importance of Fiat in Italy. Great concern has been expressed regarding its consequences, both social and economic. As regards the former, the impact on employment is considerable, and may be even more severe given that it will also affect the numerous firms working on subcontracts for Fiat. Moreover, the closure of Fiat plants would threaten the industrial development of various parts of the country: significant in this regard is the news that the Fiat plant at Termini Imerese in Sicily will be closed. From the economic point of view, besides the consequences for the economy, some commentators argue that the Fiat crisis is part of the industrial decline that in recent years has affected sectors once crucial for the Italian economy, such as motor manufacturing, chemicals and electronics.

The possibility that the Fiat crisis could be resolved with its takeover by General Motors is not without its risks. Some commentators believe, in fact, that this would disperse the company’s stock of knowledge and expertise, given that its research and development division may be 'downsized'.

At the moment it is difficult to envisage what the outcomes of the Fiat crisis will be, although one can predict that it will have major social repercussions. For this reason one may expect it to be accompanied by a resurgence of industrial conflict. (Marco Trentini, Ires Lombardia)

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