Fiat CEO says performance would be better without Italy

Article by Christian A., on October 26, 2010

If Fiat S.p.A. didn’t have its money-losing Italian plants, it would have a better performance, according to its Chief Executive Officer Sergio Marchionne. Italian news agency ANSA said that Marchionne told the television program Che tempo che fa on Sunday that no portion of the EUR2 billion of trading profit that Fiat is aiming for 2010 will come from Italy, where all Fiat passenger-car plants are racking up losses.

In a pre-recorded interview with the program, Marchionne had said, "Fiat could do more if it could cut off Italy."

Fiat, Italy's biggest industrial group, has made promises to invest billions of euros in Italy if it receives more labor flexibility at its Italian factories, where production is costlier than at some of its foreign plants.

Analysts were surprised last week when Fiat, which owns 20 percent of Chrysler Group, upgraded its 2010 guidance for trading profit well above forecasts. At Fiat, trading profit is calculated as earnings before interest, taxes and one-time gains or losses.

Marchionne intends to shut down Fiat's Termini Imerese plant in Sicily and he has gotten the support of a majority of workers at the company's Pomigliano D'Arco plant near Naples to present several landmark revisions to the national labor contract.

The problem is that one key union opposes the plans. If the new working agreement is employed, Fiat will produce its new Panda minicar at the Pomigliano D'Arco plant.

Fiat (Fabbrica Italiana Automobili Torino) was founded in July 1899 by a group of investors, including Giovanni Agnelli. Since then, Fiat has grown to become one of the major auto companies in the world, as achieved partly by acquiring other carmakers such as Lancia in 1968, Ferrari in 1969 (as shareholder), Alfa Romeo in 1986 as well as Maserati in 1993.

In January 2009, Fiat S.p.A. and Chrysler LLC signed a non-binding term sheet to form a global alliance. Chrysler filed for chapter 11 bankruptcy protection on April 30, 2009, and at the same time announced an alliance with Fiat. Prior to the bankruptcy filing, Chrysler had already received $4.5 billion in financing from the U.S. government.

On May 31, 2009, a bankruptcy judge approved a proposed government restructuring plan and sale of Chrysler's assets. A new company – owned 20 percent by Fiat and 55 percent by the UAW retirement health care trust – would acquire purchase most of the assets of Chrysler. The new company Chrysler Group LLC completed the purchase on June 10, 2009, allowing Chrysler to emerge from bankruptcy.

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