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Marchionne: Fiat Would Do Better Without Italy

“Not a single Euro” of profit from Italian plants, sighs CEO.

by on Oct.27, 2010

Fiat might be better off without Italy, suggested CEO Sergio Marchionne.

It may be based there, but Fiat would be better off without Italy, suggests the automaker’s outspoken CEO Sergio Marchionne.

Often critical of the country’s less-than-efficient bureaucracy and its demanding unions, Marchionne warned, on one of Italy’s leading TV shows, that Fiat “cannot continue…forever” to operate in a country where a lack of productivity is considered an acceptable norm.

“Not a single Euro of Fiat’s planned 2-billion Euro profit margin comes from Italy,” Marchionne said during an appearance on the show “Che tempo che fa.”

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Marchionne made his appearance on the show shortly after announcing the company pulled a 236 million Euro profit for the third quarter and outlining the even bigger target for all of 2010, exceeding analysts’ earlier forecast.

The Canadian-educated executive has been moving aggressively to improve the fortunes of Fiat’s automotive operations – which recently spun off the industrial side of the Turin-based company.  But he argued that what’s left of Fiat cannot achieve its potential unless dramatic steps are taken to improve productivity.  None of the company’s five Italian plants, Marchionne asserted, separately or together, can match the efficiency of Fiat’s plant in Poland.

“Fiat would do more if it took Italy out of its results,” Marchionne said during the TV program, adding, “We cannot continue to manage operations at a loss forever.”

Perhaps none of those five plants is more symbolic of Fiat’s problems than the one in Sicily.  The Termini Imerese plant was originally built under pressure from the Italian government as a way to provide good-paying jobs to a normally depressed region.  But it requires virtually everything, down to the smallest components to be shipped to or from the plant.  And high wages and restrictive work rules only complicate matters, according to Fiat.

Marchionne has said he will close the Sicilian factory.  And he has won concessions from a majority of the workers at another key plant.  But Fiom, the key Fiat union, is resisting those and other efforts to improve productivity – even though Marchionne is promising to invest nearly $28 billion in Italy if he gets the efficiency improvements he is seeking.

The Fiat CEO – who is also pushing to improve productivity at U.S.-based Chrysler, where he also serves as CEO – has made it clear that his company isn’t the only one suffering under high costs and low productivity.  His proposals, dubbed Fabbrica Italia, or Factory Italy, are essential for the nation’s long-term competitive viability, he concluded on “Che tempo che fa.”

“The real problem is competitiveness,” Reuters news service quoted Marchionne.  “Our proposal aims to give Italy, and Fiat, the ability to compete with neighboring countries.”

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