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Fiat agrees to up output

But Sicily plant must go, Marchionne says

22 December, 18:26
Fiat agrees to up output (ANSA) - Rome, December 22 - Fiat on Tuesday agreed to raise car production in Italy to up to one million by 2012 to ease the effect of the recession on its Italian workers.

But it confirmed that a cost-deficient Sicilian plant would have to be shut down.

At talks in Rome with Industry Minister Claudio Scajola and unions, Fiat CEO Sergio Marchionne said Fiat was prepared to "raise production up to a range going from 800,000 to one million", from the current 650,000. Going into the meeting, Scajola had asked the carmaker to raise output to 900,000 from 800,000 before the global crisis hit.

But Marchionne was adamant about shutting down car production at the expensive Termini Imerese plant in Sicily, whose workers protested outside the government offices.

He said Fiat was willing to talk to the regional government of Sicily about converting the plant to other uses.

"We are ready to put their plant at their disposal," he said.

The factory on the northern Sicilian coast 30km (20 miles) east of Palermo would stop making cars in December 2011, he said.

Citing "structural difficulties," he noted that Termini Imerese had been running at a loss for years.

Unions vowed a "strong" response to news of the closure. Marchionne said a restructuring of another inefficient plant, at Pomigliano d'Arco near Naples, was also "urgently" needed.

"Pomigliano simply can't go on the way it is now," Marchionne said, noting that Fiat had already put an extra one million euros ($1.4 million) into it "but this did not succeed in cutting the over-capacity (problem)".

Marchionne stressed: "If we just think about social costs then this company would disappear".

"We must tackle the problem (of high Italian labour costs) head-on: our future depends on it".

"If we didn't do that it would be our ruin".

However, the CEO said Fiat had "ambitious" plans for Italy and was prepared to pour some 8 billion euros ($11.4 billion) into Italian plants over the next two years.

Marchionne said 11 new models would be introduced in the two-year period, he said, including new versions of the Fiat Panda, Lancia Ypsilon and Alfa Giulietta.

The new Panda would be made at Pomigliano, he said, confirming levels of production at Fiat's two other key plants in Turin (Mirafiori) and Melfi in southern Italy.

There had been doubts going into the meeting whether Marchionne would meet the government's demands. "We have six sites in Italy which produced the equivalent of one factory in Brazil. What kind of industrial logic is that?" Marchionne said recently.

At Tuesday's talks, Marchionne said that the whole of Europe continues to suffer from over-capacity.

"European over-capacity must be tackled as US over-capacity has," he said, adding that Chrysler was "fundamental" to Fiat's future.

However, he warned, the overall outlook for Fiat/Chrysler in the global car market "continues to be unfavourable". Amid the bargaining, Fiat has already secured a government commitment to extend a 'cash-for-clunkers' scheme that has helped keep it competitive in Europe and dominant in Italy, where it holds some 33% of the market share.

It also benefits from new tax breaks.

But Marchionne denied suggestions that Fiat was getting too much from the government.

"It's not true that we're getting government aid. We have tax credits of about 800 million euros ($114 million)".

"The incentives were funded by Fiat (too)," he said.

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