Fiat CEO Calls for Change at Meeting with Trade Unions

Fiat's chief executive officer (CEO) Sergio Marchionne has called on trade unions to make changes or else face the prospect of a reduction in planned investment in Italy. He made the statement at a meeting called by the Italian government to bring the automaker together with its unions following the announcement of plans to shift production of a new small multi-purpose vehicle (MPV) from its Mirafiori plant in the country to Kragujevac (Serbia). Sources at the meeting told Automotive News Europe (ANE) that Marchionne said, "We reaffirm the importance of our investment in the Fabbrica Italia project but we want guarantees that the sites will be able to function", before adding, "We are not making threats, but we are not prepared to put the survival of the company at risk."

He was also reported by the ANSA English Media Service as going on to say: "If the project is just a pretext to leave things as they are, it's right that everyone assumes responsibility for their actions in the knowledge that Fabbrica Italia cannot go ahead and the plans and investments will have to be downsized. At this point we want a yes or a no. Yes means modernising the Italian industrial system. No means leaving things as they are, accepting that the industrial system will continue to be inefficient and inadequate for making profits, and therefore for keeping or increasing jobs."

Marchionne was also quoted by Dow Jones International News as stating that the current tactics employed by some union members would not be tolerated. He stated, "The important thing is to be able to manage the plants…Production by hiccups, with unjustifiable levels of absenteeism or with [assembly] lines blocked for entire days is a risk that we can't put up with."

The senior executive also pointed out that Fiat is the only company prepared to make an investment of 20 billion euro (US$26 billion) in Italy and that this is equivalent to the extent of the Italian government's austerity measures between 2011 and 2012.

Marchionne also tried to reassure unions that the shift of the L0 MPV to Serbia would not result in serious cutbacks at home. He told them, "The move does not remove prospects for Mirafiori…There are alternatives to guarantee its volume of production',' suggesting that these would be vehicles of a higher value.

The statement was met with openness by some unions. The head of the CISL union, Raeffaele Bonanni, told ANSA that he would say "yes, without ifs, without buts", while the secretary-general of the confrontational FIOM union, Maurizio Landini, said, "We are ready to talk about making the plants more efficient." However, both have said that any agreement would have to be achieved within the national collective bargaining framework after Marchionne admitted that Fiat could withdraw from this process.

However, other union leaders were more sceptical, with the head of the CGIL, Guglielmo Epifani, stating that he had "heard lots of optimistic talk but the truth is that there's nothing new". He went on to say, ''The uncertainty about the production commitments [in Italy] remains. The reassurances about the future of Mirafiori are not commitments or certainties." Epifani also said that he was looking to the government for further involvement in the process, stating, "It cannot be a spectator."

In relation to the possibility of Fiat's withdrawal from the national labour contracts framework, Marchionne has also suggested that the automaker could pull out of the Italian business association Confindustria. However, following the meeting with trade unions, Marchionne met with Confindustria's leading official, Emma Marcelgaglia, after which he told reporters, "Emma and I are convinced we can reach an agreement."

Outlook and Implications

It is perhaps just as well that the Italian government stepped in at this point following a rise in tensions between the two sides. There now seems to have been a welcome reopening of real communication lines. However, it should also be noted that this is just the first step in a process that looks set to provoke a substantial upheaval of relations between Fiat and its workforce. A decision by Fiat to withdraw from the national contracts would be perhaps the biggest change; the company is already looking to circumvent this process via the creation of a separate business through which it can run the troubled Pomigliano plant (see Italy - Serbia: 28 July 2010: Fiat Reportedly Creates Separate Company for Pomigliano Plant, Serbian Facility to Begin Test Production in H2 2011). Although no official word has been given as to what its role will be, it seems more than likely that it will be used to break the current contracts with workers at the plant and sign up only those prepared to work under the new conditions that it has already set out. By stepping away from such contracts on a national scale, Fiat would be able to implement similar measures at its other plants, significantly improving utilisation levels, one of the main targets of the Fabbrica Italia project. It would also result in a return to profitability for these operations, something that Fiat does not lack elsewhere in the world, according to Marchionne.

The removal of this framework is not something that the unions will accept easily, given the power it confers on them and the workforce. However, as Fiat becomes even more of a global company, the unions will have to wake up to the fact that the automaker can increase its competitiveness by shifting production elsewhere. ANE has pointed out that in Serbia annual production levels can be achieved on 12 shifts of 10 hours per week that the Pomigliano facility could only match by deploying 18 eight-hour shifts. Added to this is the fact that Serbian workers are paid on average around one-third the wages of an equivalent Italian. The Serbian government has also played a key part in attracting the automaker to the country by offering a 10-year tax exemption on vehicles manufactured at the facility. It is therefore not surprising that the automaker has chosen to try to shift the production focus of its popular low-cost vehicles away from its domestic plants in recent years, tending instead to risk larger, higher-profit models. With this in mind, the unions will need to think carefully about whether they are prepared to see a further reduction in production output in Italy on top of the 1.4–1.5-million-unit cuts that have already been proposed (see Italy: 22 July 2010: Fiat Changes Tack on Italian Production Plan Following Difficulties at Pomigliano).