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Feature: Italian auto giant FIAT halves domestic production
Last Updated: 2013-09-26 11:25 | Xinhua
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Production plants of Italy's auto giant Fabbrica Italiana Automobili Torino (FIAT) are running at half capacity in the country due to the economic crisis and its new global strategy, FIAT's press office told Xinhua.

"We are currently employing our Italian factories at 50 percent of their capability more or less due to sluggish demand," a spokesman of the office told Xinhua in an interview.

In the first eight months of 2013, FIAT produced 260,000 new cars, a 10-percent reduction from last year, and in August, 15,700 were produced, down by around 6 percent year on year, he added.

FIAT now has six plants and around 24,000 workers across Italy. It owns 58.5 percent of Chrysler.

It has recently confirmed big investments are being made to boost production in Italy, with a focus on the flagship Mirafiori plant of Turin where the new Maserati SUVs will be produced. It is investing 1 billion euros in the Turin plant.

FIAT investments in Italian factories should exceed 3.5 billion euros in total, the spokesman confirmed, adding the car market is expected to improve at some point in 2014.

However, the situation still seems gloomy and it is unclear whether this investment plan will be enough to reverse it, he said.

"The Italian FIAT production is going through a very delicate situation," said Giovanni Fiori, economist and professor of business administration with LUISS Guido Carli University of Rome.

FIAT has three main problems to tackle, including a 30 percent overcapacity of the whole car industry at the global level, a sharp fall in domestic demand which has dropped to the level of 1970, and labor productivity, Fiori noted.

Low productivity is a long-standing weakness of Italy and one of the main challenges for restarting its economy.

Among the Organization for Economic Co-operation and Development (OECD) countries, Italy is one of the lowest in terms of productivity, which has made Italian plants non-competitive not only against developing countries with lower labor costs, but also against European partners like France, Germany and Spain.

Unless Italy solves its problem of low productivity, there will always be the chance, though very remote, that FIAT would leave the country for good, Fiori said.

FIAT CEO Sergio Marchionne said he had no intention of closing down factories in Italy, even though he had previously threatened to do so after a constitutional court ruling forced the company to accept representatives of a hard-line union that had refused to approve the contract's terms at the Mirafiori plant.

Now the problem has been solved. Unions have agreed to more flexible work rules applied to all the Italian plants.

Also, FIAT has been granted an extension of the redundancy fund agreement to 2014, which allows temporary layoffs in all factories, but not for all at the same time.

"Not all the workers are on redundancy," the FIAT spokesman said, adding the company resorts to that only when and where the demands drop.

For example, the Maserati production is currently at full strength because consumers keep asking for Maserati and thus there is no layoff, he went on to explain.

But the Panda production in the Pomigliano plant, on the contrary, has been cut by half, which put around 2,400 workers out of 4,000 on redundancy payment, he said.

Meanwhile, FIAT will implement its restructuring plan, he added.

The company has exercised redundancy payment since the beginning of the economic crisis in 2008. It has reached an agreement with unions and the government, and the redundancy payment is disbursed from public funds.

Otherwise, FIAT would have fired 15,000 to 18,000 workers, he noted.

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