Shift in Fiat’s bargaining strategy sparks debate

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A broad debate over the reform of the Italian bargaining structure has been sparked by Fiat’s decision to abandon industry-wide bargaining. Instead, it has established new companies for each of its Italian plants so that they can sign first-level collective agreements to regulate employment independently of the metalworking sectoral agreement. Fiat did this because a union split led to doubts over the workability of a traditional deal at its Pomigliano plant near Naples.

Background

Fiat began negotiations with unions in 2010 to implement its 2010–2014 industrial plan to reorganise plant utilisation rates and work organisation patterns. However, although it reached a deal at the Pomigliano plant, near Naples, in June 2010, a trade union split created uncertainty about the enforceability of the agreement and pushed the company to adopt a new strategy of seeking single-employer agreements. This began with the negotiation of the Mirafiori agreement (25Kb PDF) of late 2010 and, according to Fiat, it should ensure better enforcement of the accords’ provisions.

Fiat is among the world’s 10 largest automotive manufacturers, producing about 2.5 million vehicles in 2009, not including a further million units manufactured by Chrysler, now under Fiat control after a bail-out deal backed by the US administration in 2009.

The Fiat Group employed 200,000 people worldwide at the end of 2010 (excluding the Chrysler Group), of which about 128,000 are in Europe (81,000 in Italy). This is a 5% rise on the 2009 figure of 190,000 workers. In 2010, Fiat Group Automobiles (FGA), which included cars and light commercial vehicles (excluding Maserati and Ferrari), employed 58,000 people worldwide, 30,000 of them in Italy, in 2010. The company’s various branches included agriculture and construction vehicles (CNH and Iveco; 54,000 employees), Fiat Powertrain Technologies (FPT; 20,000 employees), components and metal products for the automotive sector (Magneti Marelli and Teksid; 42,000 employees), and automotive equipment (Comau; 12,000 employees). The remaining workforce was employed by Ferrari and Maserati (3,500 employees) or engaged in other activities (10,500 employees).

In April 2010, Fiat presented its 2010–2014 industrial plan (1.65Mb PDF) which envisaged the demerger of ‘non-auto’ activities into a separate corporate entity (Fiat Industrial, covering CNH, Iveco, FPT Industrial & Marine), whereas all ‘auto-related’ activities would come under the umbrella of new company Fiat Spa. This would be responsible for FGA, (including the Chrysler stake) Maserati, Ferrari, FPT Passenger & Commercial Vehicles, Magneti Marelli, Teksid and Comau. The 2010–2014 plan envisaged:

  • total investments of around €26 billion;
  • a significant reorganisation of FGA;
  • the integration of Fiat and Chrysler activities in the medium term;
  • a total FGA-Chrysler joint production target for 2014 of six million cars, almost three times the 2009 level.

Part of the FGA 2010–2014 plan (2.6Mb PDF) was ‘Fabbrica Italia’, a business plan geared towards a thorough reorganisation and relaunch of Italian production sites to stimulate productivity and confirm Italian plants as the ‘core’ of FGA. Substantial investments were announced (roughly two thirds of the overall amount) to support an increase of production levels to 1.65 million passenger cars and light commercial vehicles in 2014 (about double the output of 2009 and mostly intended for export). Specific requests in terms of work flexibility were put forward by the company management:

  • full plant utilisation (18 shifts per week);
  • utilisation of the Wage Guarantee Fund during the plan implementation phase;
  • containment of overheads and labour costs;
  • full commitment to and progressive implementation of the company aims set out in its document World Class Manufacturing (9.5Mb PDF);
  • responsiveness to market cycles and trends (such as peak demand and downtime).

According to the company industrial plan, this would develop into ‘a new working model based on a joint commitment to the future’. However, the company clearly stated that if it proved impossible to implement the ‘Fabbrica Italia’ project, investments and production would move to other locations, such as other FGA plants in Europe, including Poland and its strategic joint ventures in Turkey (Tofas) and Serbia (Fiat Automobiles Serbia Doo Kragujevac).

Italian plants and the ‘Fabbrica Italia’ project

FGA has six major plants in Italy: Mirafiori (Turin, 5,500 employees), Cassino (Frosinone, 4,000 employees), Giambattista Vico (Pomigliano, 4,700 employees), Melfi (Potenza, 5,300 employees), Termini Imerese (Palermo, 1,350 employees) and Sevel (a joint venture with Psa-Peugeot for the production of light commercial vehicles in Val di Sangro, 6,200 employees).

Intense debate and protests by unions were sparked when the company announced in 2008 that the Termini Imerese plant, in Sicily, would close by 2011. Management said the decision was ‘irreversible’ but promised to support plans for the plant conversion put forward by the Sicilian regional government, other institutions and/or private groups (IT1002019I). In mid-February 2011, an agreement was reached between Fiat, the national government, local authorities and some prospective investors to ensure new initiatives and preserve employment (see ‘Restructuring in the FIAT plant in Termini Imerese’, ERM Quarterly Spring 2011, 210Kb PDF).

Significant increases in equipment utilisation are envisaged for most of Fiat’s other Italian plants. However, the company has so far taken a plant by plant approach to restructuring. The first round of negotiations was opened in May 2010 at the Giambattista Vico plant in Pomigliano, near Naples. This was the FGA plant with the lowest equipment utilisation rate in 2009 (14%). The second round focused on the Turin Mirafiori plant, the historical ‘heart’ of the Fiat Group. Negotiations started here in late November 2010.

From second-level bargaining to first-level establishment agreements

The topics under negotiation were very similar at both Pomigliano and Mirafiori, and aimed essentially to improve utilisation rates and productivity by establishing new working time arrangements and work organisation. They also included stricter rules on absenteeism and a no-strike clause (a ‘responsibility clause’) to commit trade unions to the implementation of the agreement. The agreement also linked pay increases to a new job classification system and to the new shift schedule.

However, at Pomigliano, the proposals were criticised by the Italian Federation of Metalworkers, affiliated to the General Confederation of Italian Workers (Fiom-Cgil), especially the no-strike clause and the rules on absenteeism that, in the union’s view, restricted individual rights. Fiom-Cgil did not sign the agreement and campaigned against it when the draft agreement was put to an employee referendum. Nevertheless, 63% of voters were in favour of the agreement.

However, the split among the unions, combined with Fiom-Cgil’s earlier refusal to sign the 2009 metalworking industry-wide agreement (IT0911029I), led to fears that the agreement would be unenforceable. Fiat decided instead to establish new companies for each of its Italian plants which would not join employer associations, and which would sign new first-level collective agreements, regulating employment conditions independently of the traditional framework of the metalworking sectoral agreement.

This meant that the individual company agreement would be the only one applied in the new companies. According to Italian laws on union representation, if Fiom-Cgil failed to sign the new first level agreements, it would not be able to offer workplace representation in the new companies. This new strategy was first applied at the Turin Mirafiori plant, but was immediately extended to Pomigliano, where a first-level agreement was signed at the end of December.

The preliminary agreement at the Mirafiori plant was reached in December 2010 and the referendum was held in January 2011. Again, Fiom-Cgil did not sign the deal and campaigned against it in the employee referendum. As with the Pomigliano accord, the employees approved the agreement, although with a lower majority (2,735 workers – 54% – voted in favour of the agreement out of the 5,060 valid votes cast). It is important to stress that in both referenda the turnout was very high at about 95%.

Commentary

Fiat’s industrial plan and the negotiations for its implementation in Italy represents, to some extent, a rather traditional example of a multinational company’s reorganisation, whereby a new pact is sought offering more flexibility and a commitment to preserve jobs and inject new investments. However, the fragility of industrial relations in the metalworking sector pushed the company along a more radical path with a view to ensuring the ‘enforceability’ of the agreement’s provisions.

The move to abandon the traditional framework of employer associations and industry-wide bargaining was seen by many commentators as a potential disruption in the Italian bargaining system. Should the example of Fiat be followed by a significant share of Italian firms, the present two-tier bargaining system would be questioned and, as a consequence, the role of employers’ associations would certainly need to be redefined. Moreover, the division among trade unions revitalised the debate on how to measure representativeness, and whether legal extension measures should be introduced, with a view to avoid disputes around the applicability of certain contracts. Some regulatory initiatives, especially in the field of representativeness, may be expected in the near future. However, despite the importance of the debate and the interest shown in the Fiat case within the business community, there have not yet been any significant repercussions, or attempts at imitation.

Roberto Pedersini, Università degli Studi di Milano

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