Fiat planning lay-off scheme at Melfi plant for two years until new models arrive

Article by Christian A., on January 17, 2013

Fiat has a pending request for the government to green-light a special layoff scheme at its Melfi factory in central Italy for two years to get it restructured before production of new models starts, according to the automaker last Tuesday. The scheme will be launched on Feb. 11 and it lasts until the end of 2014. It will permit the automaker to halt one line at a time out of two at the plant.

Melfi, one of the most important facilities of Fiat in Italy, presently makes the Punto subcompact. Last December, Fiat said that it will make an investment of over 1 billion euros ($1.3 billion) to build a new Jeep (known to insiders as the B-SUV) and the new Fiat 500X beginning in 2014 in the Melfi factory. With this move, the automaker will be able to increase the capacity usage and reduce losses in Europe by concentrating on high-margin cars.

Fiat aims to present 19 Italy-built models through 2016, which include 9 Alfa Romeo-badged vehicles and six Maseratis. The carmaker plans to raise production of Fiat and Chrysler cars in Europe to 2 million cars annually in 2016 from 1.25 million in 2012. Fiat-Chrysler CEO Sergio Marchionne thinks that the automaker’s European operations will go back to an operating breakeven by 2015-2106 if it uses Fiat's Italian plants to export cars worldwide.

Because of difficulties in Europe, the manufacturer was able to lower its 2014 trading-profit goal by 31% to 5.2 billion euros. Similar to other automakers, Fiat (which controls U.S. carmaker Chrysler) has been very affected by the debt crisis in Europe. Sales in Italy last year dropped to the lowest figure since 1979. Consumer budgets were affected by government spending cuts and high unemployment rates. These made demand for cars drastically drop in this industry that suffers from overcapacity.

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