Troubled Fiat plans new job losses

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Following the announcement of very poor financial results for the first quarter of 2002, largely due to problems in its automobile division, the Italian-owned industrial group Fiat adopted a strategic recovery plan in May. The reorganisation programme, which is now subject to discussions with the trade unions, may involve 3,300 redundancies in Italy, with many more jobs likely to be lost in suppliers and service companies.

During the first three months of 2002, the Fiat SpA group - one of Italy's main industrial companies - suffered a net loss of EUR 529 million, compared with a loss over the same period in 2001 of only EUR 16 million. At present, the group's debts amount to EUR 6.6 billion. On the stock exchange, Fiat shares have fallen to their lowest level in 10 years. The value of the group is now slightly over EUR 7 billion - EUR 5 billion less than the value of its Fiat Auto automobile division when it signed an alliance agreement with the US-based General Motors in 2000 (IT0004151F).

Fiat Auto's poor performance - during the first three months of 2002 it lost EUR 429 million - has had a severe effect on the group's accounts. Market problems (car sales around the world have decreased by 15%) and the falling competitiveness of Fiat have contributed to worsening the situation: in April 2002, the sales of Fiat cars in Italy decreased by 21.7%, against an overall decrease of 13.4%. Some strategic decisions taken in the past have proved to be wrong: the main emerging markets on which Fiat had counted - Poland, Turkey, Brazil and Argentina - are in crisis; and the costs of the new corporate structure decided in late 2001 (IT0201107N) appeared to be unsustainable

In order to relaunch Fiat SpA, and in particular its automobile division, the board of directors plans a number of strategies, including: an industrial reorganisation plan; a financial plan aimed at rescheduling debts through the involvement of creditor banks; and government intervention (though in compliance with the principles of the free market).

The industrial reorganisation plan was drawn up and approved by a Fiat shareholders' meeting on 14 May 2002 and presented the day after to the trade unions for discussions. The reorganisation will have severe consequences on employment. More than 3,300 redundancies are forecast in the group's companies: 2,887 in the automobile division (including 1,831 blue-collar workers and 611 white-collar workers) and 445 in service companies. In June 2002, more than 10,000 employees will be laid off temporarily and receive income support from the wages guarantee fund (Cassa integrazione guadagni, Cig) - one of the 'social shock absorber' schemes which cushion the effects of restructuring in some sectors (IT9802319F). The majority of the redundancies will affect workers at plants in Turin, with a small number in southern plants.

The plan takes also seeks to implement new production and marketing policies. More specifically the plan foresees:

  • the launch of new Fiat and Lancia high-powered cars;
  • major investments in the distribution network;
  • stopping low-profit sales of cars;
  • the launch of the Alfa Romeo brand and products on the US market;
  • the accelerated divestment of some secondary activities to halve debts by generating receipts of EUR 3.2 billion;
  • a decrease in the proportion of retail sales and an increase in the share of sales destined for company cars (from 10% to 20%);
  • increased productive 'synergies' with General Motors; and
  • reductions in advertising expenditure.

Fiat will not close any plants, but will reduce the number of production lines in order to increase the utilisation rate of plants, within three years, from 70% to 90%.

The Fiat reorganisation plan provides for 3,300 direct redundancies, to which must be added the knock-on effects for suppliers, service companies etc making up the 'Fiat automobile system', which will probably amount to 10,000 redundancies.

The group's strategic financial plan foresees the involvement of banks. On 25 May 2002, Fiat's three main creditor banks - Banca di Roma, IntesaBci and SanPaolo Imi- met to develop a financial and rescheduling plan for its debts, in line with the company's industrial reorganisation plan.

The government's actions to address the Fiat crisis will mainly concern the automobile division. There may be incentives for consumers to purchase cars, affecting the whole Italian automobile sector, and it is possible that the workers of Fiat supplier and service companies may be able to benefit from the wages guarantee fund. Many of these workers are employed in companies with fewer than 15 employees and are therefore currently ineligible to receive income support from the Cig (IT0205204F).

The situation of the Fiat group has also received attention from parliament. On 4 June 2002, the Chamber of Deputies' committee for productive activities launched a survey to assess the condition of Fiat and of the whole Italian automobile industry. The committee will draft, before the end of June 2002, a report to guide the government's initiatives in this area.

Umberto Agnelli, a representative of the family which has controlled Fiat since its foundation in 1899 and president of Ifil (which manages the assets of the Agnelli family), said that the restructuring plan is 'credible, like the management which wants it'.

According to Sergio Cofferati, the general secretary of the General Confederation of Italian Workers (Confederazione Italiana Generale del Lavoro, Cgil) 'the Fiat group has lost market share because it has a limited range of products which are also qualitatively inferior to those of its competitors. Fiat should invest in innovation and quality.' Antonio Sansone, the local secretary of the Italian Metal-Mechanical Federation (Federazione italiana metalmeccanici, Fim), affiliated to the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl), highlighted the social problems created by the Fiat crisis in Turin and the whole Piedmont region. According to Mr Sansone 'the problem will not be only cars and the automobile system but the industrial future of Turin and of the entire region.'

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