Italy without Fiat? CEO says Italian plants unprofitable

Fiat Grande Punto production at Stabilimento Mirafiori factory, Turin, Italy, 1600, 28.10.2010

Outspoken Fiat CEO Sergio Marchionne says the company would be better off without having to base its operations in Italy

Fiat would be better off it it wasn't based in Italy, so said Fiat CEO Sergio Marchionne on an Italian television program.

Fiat is forecasting a profit of €2 billion for 2010 but none of that will be due to its Italian operations which consist of 5 assembly plants. None of those plants are profitable, according to Marchionne.

""Not a single euro of (Fiat's) planned 2-billion-euro profit margin comes from Italy. Fiat would do more if it took Italy out from its results. We cannot continue to manage operations at a loss forever," said Marchionne.

Marchionne cites the inflexibility of labor unions as a reason for the inefficiency of Fiat's Italian plants. Fiat's domestic factories cannot match the productivity of its single plant in Poland.

Fiat wants to stay in Italy but needs concessions from the trade unions. The automaker has a program called Fabbrica Italia (Factory Italy) with the goal of making its Italian operations competitive on a European level. Fiat wants to invest €20 billion in Italy but unions must give up long break times and other perks in exchange for more compensation to increase productivity.

Source: Reuters

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Edison

Seems like these auto unions like to bite the hand that feeds them. In certain fields I can see the need for unions, but I tend not to like organizations that promote laziness and entitlement. That being said, I think Marchionne's comments are a bit OTT and he should have qualified them by saying that FIAT would be better off if their manufacturing wasn't based in Italy. After all, FIATs are engineered and designed in Italy and I am sure most of the componentry is sourced from Italian suppliers. There wouldn't be a FIAT if it wasn't for these key value-added components that are based in Italy. This is kind of a slap in the face to his workers that are non-unionized.

October 28, 2010 1:24 pm

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Mikeado

"FIAT" is an acronym. It stands for "Fabbrica Italia Automobili Torino", or "Italian Automobile Factory of Turin". If they stop making cars in Italy, they will have to change their name to Fabbrica Polania Automobili Tychy, or "F-Pat", which isn't so catchy, to be honest...

October 28, 2010 5:40 pm

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tbrodie

It was the 70's UAW contract that brought GM to it's knees. The costs were so high they had to increase production to the point where quality and reliability suffered. Of course, their business model of many redundant mediocre cars didn't help, despite improved quality and reliability. I dont think any of the foreign manufacturers in the US have the UAW.

October 29, 2010 12:24 am

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maloparac

Now is the best time for Zastava to buy FIAT and move all production in Serbia...ha ha ha

October 29, 2010 4:43 am

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tom43

I can?t agree with the argumentation of Marchionne that the unions are the major reason for the inefficiency of the italian plants compared to the polish plants! The profit of the polish plants is based on just one model, the Fiat 500. Because of its retro design and image this car can be sold with a much higher profit margin compared to the models produced in Italy. The italian models are in a strong competition and many of these cars, e.g. the Fiat Bravo, are based on out-of date chassis and electronic structures. What about an investment in new models, Mr. Marchionne????

October 29, 2010 6:45 am

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Wojtek

500, panda and ford ka

October 29, 2010 7:46 am

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buruchaga

Unions negotiate high salaries for employees without taking much into account profit fluctuations. Cost of production(and for that matter employees salary) is very high in western countries compared to that of the eastern blocs.

October 30, 2010 12:07 pm

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GHERNAS

IF FIAT MOVE OUT OF ITALY .....ITALY WILL DEI!!

October 29, 2010 11:29 am

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alessandro

European culture is not profitable in general because it is beautiful and we love it. Based on personal creativity it is expensive too. Could in other hand prevailing economic practice and theory reach it hence they are so suitable for more or less totalitarian societies? Look at China, what a speed of growth. "Dark age of macroeconomics is upon us" - P. Krugman (Nobel prize in economics 2008)

October 31, 2010 8:51 am

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stickshifter

maybe there is a man in poland, who would do a better job as CEO for less money than Sergio Marchionne. Why is it always about money?

October 31, 2010 2:29 pm

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