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Old 02-04-2010, 02:57 AM   #1
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Default Holy and Unholy Bedfellows Fight Closure of Fiat’s Troublesome Island Plant

Industrial action has brought chaos to Fiat’s factories, offices and even some dealerships in Italy, in a concerted attempt to fight the planned closure of the company’s plant in Termini Imerese, on the island of Sicily. Fiat CEO Sergio Marchionne’s determination to close the troubled factory next year has infuriated opinion in the country, attracting criticism from Prime Minister Silvio Berlusconi and even Pope Benedict XVI. Left-wing unions and far-right activists have been among the most vocal protestors.

Italians certainly know how to protest, and Wednesday saw up to 80,000 Fiat workers across the country take part in a four-hour strike, while one neo-fascist group used plastic tape to try and seal off some 40 dealerships as well as the entrance to Fiat‘s Turin headquarters.

Moving further Fiat production capacity to its lower-cost factory in Tychy, Poland – which already builds Fiat‘s 500 and Panda models – has become a huge political issue in Italy, a country where until recently Fiat commanded huge brand loyalty and was the nation‘s acknowledged industrial powerhouse and a key employer.

Termini Imerese currently builds the Lancia Ypsilon model, an attractively styled but low-volume premium small car which sells relatively well in Italy, yet has a limited presence elsewhere in Europe and none at all in some key markets like the UK.

The current generation model will go out of production in 2011, and future plans for chronically-underperforming Lancia include a drastic shake-up which – for better or worse – will see much greater integration with new partner Chrysler.

The economic case for closing the Sicilian plant looks strong. Fiat says it loses 1,000 euros ($1,500) on every car produced at the factory, which employs 1,400 people in what is, however, an acknowledged unemployment blackspot.

Like the Alfa Romeo factory in Naples, Termini Imerese was a product of government policy in the late 1960s which wanted to diversify auto production away from its traditional home in Italy’s north, to help industrialise traditionally poor regions with little large-scale industry and stark economic prospects.

Moving production off the mainland to Sicily has had severe drawbacks, however, in terms of lack of infrastructure and the additional costs of raw materials and shipping.
The plant became operational in 1970, and in its time has built some classic small Fiats including early versions of the rear-engined 126, and the radical Giugiaro-styled Panda of 1980. Ironically, production of the 126 later moved to then-Communist Poland, showing the lure of low-cost assembly is not a new phenomenon.

The 126 and Panda both suffered chronic quality problems as the strike-prone and inexperienced Sicilian workforce struggled to make them to consistent standards. This has improved in recent years, hence the decision a while ago to allow the factory to assemble a more costly Lancia.

In the current economic climate, with large-scale government support across Europe to the car industry through taxpayer-subsidised scrappage schemes, plans to shift production overseas has not been popular with under-fire politicians or the public in many countries.

A similar row erupted in France a little while ago over plans to shift production of the next generation of Renault’s best-selling Clio hatchback, to Turkey.

The intervention of Pope Benedict has been a further interesting development, with many commentators furrowing their brows over seeming Papal interference in Italian affairs. It is no coincidence that Sicily is a heartland of the

Catholic church.

At the end of his most recent angelus blessing, the Pope said: “The economic crisis is causing the loss of many jobs and this calls for a huge sense of responsibility by everyone: entrepreneurs, workers, governing officials. I think of some difficult situations in Italy, like, for example, Termini Imerese.”

The Pontiff called on the authorities to “do everything possible to protect and spur job growth, assuring dignified and adequate work to sustain families.”

Whilst Fiat is sticking to its guns so far, it has already indicated it is willing to hand over the Sicilian plant to any serious business that would help preserve jobs – though where such an enterprise will be found is unclear. It might also consider a deal to keep part of the factory going to make components.

In the old days, an Italian government of a different hue from Signor Berlusconi’s might have considered taking the plant into national ownership, as it did in respect of the Alfa Romeo marque for many years, incurring huge losses to the taxpayer in the process.

Today, however, European Union legislation designed to promote free trade and competition makes such a move nigh-on impossible anyway. There has also been a recognition that the whole of Europe must tackle its current auto overcapacity, with Opel’s Belgian plant at Antwerp another recent casualty of this harsh reality. More surely will follow.

Resurgent Fiat’s global ambitions are such that it seems inevitable it will want to move more production out of Italy in time, not least to Serbia (where it is preparing to launch a new low-cost model made in the old Zastava plant). It also has successful operations in Turkey and Brazil, as well as Poland.

Companies and politicians across the continent will be watching this epic battle of wills with intense interest.
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