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Sergio Marchionne (REBECCA COOK/REBECCA COOK/REUTERS)
Sergio Marchionne (REBECCA COOK/REBECCA COOK/REUTERS)

Fiat CEO bemoans Italy's productivity Add to ...

Fiat boss Sergio Marchionne blasted Italy for lack of competitiveness, driving the point home by citing the car maker's own Italian factories as shining examples of inefficiency.

Mr. Marchionne, who is CEO of both Fiat and Chrysler, said Fiat's Italian factories produced no profits for the automotive group. "We still have a loss [in Italy]" he said in an interview with the Italian state broadcaster RAI. "If we were to eliminate that Italian side from our results, Fiat would do more."

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The Italian-Canadian executive recently raised Fiat's trading profit forecast for 2010 to €2-billion ($2.8-billion). Of that amount, "not one euro" comes from Italy, he said.

The outburst was widely seen as an attack on Prime Minister Silvio Berlusconi and his apparent lack of industrial policy, as opposed to a genuine threat to end car production in Italy and expand the more efficient factories in Poland, Serbia and Brazil. Fiat has offered to invest €20-billion to double car production in Italy, but only if the unions accept more flexible labour rules, work longer weeks and end the absenteeism that has crippled some plants.

His comments came as Nomura International criticized Italy's austerity measures as "not ambitious enough" and that structural reforms are needed to boost economic growth. Italy's Finance Ministry predicted last month that gross domestic product would rise by 1.2 per cent in 2010, up from the previous forecast of 1 per cent. The Bank of Italy recently said the goal of reducing the budget deficit to 5 per cent of GDP this year would be in jeopardy if growth stalls, as some economists expect.

Mr. Marchionne's attack on Italy's competitiveness is hardly unique. Confindustria, the Italian employers' association and one of the country's most powerful lobby groups, has long criticized Mr. Berlusconi for spending more time trying to avoid prosecutors than setting competitive industrial policy. The group has challenged the government's unemployment rate statistics (Italy's 8.2 per cent unemployment figure is almost identical to Canada's).

In the interview, Mr. Marchionne cited World Economic Forum statistics that ranked Italy 118th out of 139 countries surveyed for labour efficiency. Italy lacked an industry minister for much of this year, after a property scandal wrecked the tenure of the previous minister in May. Many industries, from appliance makers to yacht builders, are getting hammered by Asian competitors.

Fiat is struggling with inefficiencies at its Italian factories. Mr. Marchionne wants those plants to be as productive as the foreign plants. The Fiat plant in Poland, where the hot-selling Fiat 500 runabout is made, makes more cars than five of Fiat's Italian plants.

The southern Italian plants are basket cases. A factory in Sicily that makes the Lancia brand is about to close. The larger Pomigliano plant, near Naples, could close unless the unions agree to Fiat's labour-flexibility and cost-cutting plan. Pomigliano's 5,000 workers produced a mere 35,000 cars last year, an average of seven cars per employee, making it one of the most inefficient car factories in the world.

Mr. Marchionne's comments appeared to be directed largely at the Pomigliano plant, where the powerful Fiom metal workers union is resisting Fiat's effort to boost production in exchange for a new deal with the workers. While Fiat is on record saying it wants to keep Pomigliano going, there is little doubt Mr. Marchionne would reverse the pledge unless he gets his way and will expand the non-Italian plants instead.

His ultimate goal is to combine Fiat and Chrysler, which is 20 per cent owned by Fiat, rising to 35 per cent next year, making them the centrepieces of a global car company. The plan could backfire unless the Italian plants become efficient and profitable.

Some Italian politicians attacked Mr. Marchionne for blaming Fiat's problems on the unions or lack of industrial policy. They said Fiat's problems were of its own making and that car purchase incentives had boosted Fiat's production volumes during the darkest days of the recession.

"If Fiat is still a giant, it is because Italian taxpayers have granted them this position," said Gianfranco Fini, speaker of the government's lower chamber.

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