Fiat faces trinity of opposition to restructuring plans: government, unions and pope

By Colleen Barry, AP
Wednesday, February 3, 2010

Fiat faces papal censure for plant closure

ROME — These days, it seems beleaguered Italian automaking could use a little divine intervention. After car giant Fiat announced plans to shut auto production at its Sicilian plant, Pope Benedict XVI waded into worldly matters to urge the company to keep the jobs in Italy.

The papal admonishment of Fiat CEO Sergio Marchionne follows a dressing down from the president of France for Carlos Ghosn, head of automaker Renault, as governments put pressure on carmakers and other manufacturers that benefitted from taxpayer help to keep production at home.

It’s a trend seen across the continent: As corporations try to stay nimble in an age of cut-throat competition, protectionist impulses are being sharpened amid soaring unemployment — and the high and mighty, from presidents to the pontiff, are weighing in.

Pope Benedict XVI gave moral support to Fiat’s 80,000 workers — who on Wednesday staged a nationwide strike to protest cuts — when he publicly urged measures this week to protect jobs.

“The economic crisis is causing the loss of numerous jobs, and this situation requires a great sense of responsibility on the part of everyone: entrepeneurs, workers and governing officials,” the pope said, singling out Fiat SpA’s Termini Imerese plant along with an Alcoa factory in Sardinia slated to close.

Neither Fiat nor Alcoa have publicly responded.

“The pope doesn’t live in another world, he wants to show he is attentive to the needs of those out of work, the poor and the suffering,” chief Vatican spokesman the Rev. Federico Lombardi said Wednesday.

While companies in Italy may face increased papal scrutiny due to the Vatican’s cozy presence in Rome, Italy is not unique in Western Europe when it comes to the symbiotic relationship between major manufacturers and government that is making it increasingly complicated for companies to make the sort of industrial decisions they deem necessary to survive.

Last month French President Nicolas Sarkozy summoned Renault boss Ghosn to the Elysee palace to voice his concern that Renault SA was deserting France for Turkey to manufacture the Clio4, to be launched in 2013. The German government pressured suitors for General Motor Co.’s Opel subsidiary over jobs after providing a euro1.5 billion ($2.2 billion) bridge loan. The Opel sale to Magna International Inc. soured when GM decided to keep the company.

And while Premier Silvio Berlusconi’s government is pressing Fiat for a commitment to save Termini Imerese’s 1,500 automaking jobs, the premier himself has appealed directly to the American aluminum maker Alcoa to keep running two smelters in Italy, employing 2,000 workers. Berlusconi’s carrot: a break on power prices that Italy has given energy-intensive industries for the last decade.

The clash is perhaps strongest in the auto industry, where rock-bottom consumer demand has given painful clarity to the longstanding concern the industry simply has too much production capacity worldwide.

“It is a slightly old-school relationship between the Western European OEMs (car manufacturers) and the government,” said Tim Urquhart, a car analyst at IHS Global Insight.

The relationships have been warped over time by government subsidies, which provided politicians a wedge into operations. In the case of Renault, the government is a 15.01 percent stakeholder. But even when a company is fully private, like Fiat, the uneasy balance of power is set by the social fabric in western Europe, where industrial solutions are often hammered in roundtables bringing together industry executives, the government and unions in an attempt to avoid costly confrontations and provide more job guarantees.

“It does need to change,” Urquhart said. But resolving the inherent conflicts is not easy. “The government is trying to get voted in, retain jobs and not to have to spend more on unemployment benefits. Management is trying to reduce costs and close plants. These two things are very mutually exclusive,” he said.

Fiat CEO Sergio Marchionne, who hopes to transform Fiat into a global player with staying power through an alliance with Chrysler reached last year, has been on the hotseat with the Italian government and unions for months since announcing Termini Imerese would stop producing autos in 2011 due to infrastructure costs that add euro1,000 to the cost of each car.

The temperature was raised last week after Fiat informed unions that it would idle 30,000 auto workers for two weeks at a time when it is urging the government to continue offering consumer incentives to trade in their clunkers to buy new fuel-efficient cars, like the ones Fiat makes.

Economic Development Minister Claudio Scajola called the timing “inopportune,” and has delayed extending the scrappage incentives even while indicating they would go ahead.

Unions have been pressing Fiat to increase production in Italy, which dropped to 650,000 last year, while production at its Poland plant reached a record 605,797 — 493,000 of those Fiat brands. Fiat has said that it aims to produce 1 million cars in Italy, and has said it would consider moving production of the revenue-generating Panda from Poland to a plant near Naples if unions can guarantee efficiency.

Unsatisfied with Fiat’s response, some two-thirds of Fiat’s 80,000 workers went on strike nationwide on Wednesday for the first time since Marchionne took over in June 2004. Striking workers at Mirafiore in Fiat’s hometown of Turin expressed their fears to Italian television cameras that the cuts won’t stop in Sicily.

“It is evident that Fiat and Marchionne are constructing an important automaking group. I don’t understand if Marchionne is putting more focus on Chrysler, I don’t think so. I think he has in mind to make cars abroad at the expense of Italy,” Antonino Regazzi, the Italian metalworkers union boss, told The Associated Press.

In the end, analysts think government pressure like Sarkozy’s summoning of the Renault chief are acts of political one-up-manship with ultimately little influence on industrial plans — even if government money is involved.

“It hasn’t changed anything,” said Carlos Da Silva, a senior market analyst at Global Insight in Paris. “Renault will end up doing whatever they want to in terms of strict strategic moves.”

But in Italy, the pope may hold more sway. His influence carries more than just moral weight — a fact Marchionne seemed to grasp when he personally delivered a tractor to the pope several years ago that is used to move risers around St. Peter’s Square for papal audiences.

Associated Press writer Greg Keller contributed to this report from Paris, Victor L. Simpson from the Vatican and Geir Moulson from Berlin.

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