In what it described as a major gamble, Fiat will go ahead with an investment of 1 billion euros – about $1.5 billion — in its flagship Mirafiori plant in Turin, Italy to assemble a Maserati sport-utility vehicle in a factory where work rules have been a major point of contention between the company and a key union.
The Italian partner of Detroit-based Chrysler has been threatening to shift production, indeed, even its headquarters, out of Italy if it didn’t get the sort of concessions needed to make it more competitive. CEO Sergio Marchionne is still dropping broad hints that Fiat’s corporate offices may be moved to the U.S.
But the maker is going ahead with plans to produce the new Maserati Levante – originally known as the Kubang – in Turin, “despite the current economic and political uncertainties,” Marchionne revealed in a letter sent to the Mirafiori plant’s employees.
“Every organization and its people face important moments. Moments when it is necessary to take courageous decisions, even though the normal prudence and logic might suggest waiting. Today is one of those moments,” Marchionne wrote.
If it were simply targeting the local market, analysts say there’d be little reason to produce the Levante in Italy, if anywhere in Europe, where auto wages are some of the highest in the world. The Italian auto market itself has nearly halved in size compared to just 6 years ago. Elsewhere in Europe, the situation is little better: demand is weak and most automakers are continuing to record losses, noted Marchionnne, who recently served as the chairman of Europe’s automotive trade association.
(Demand for luxury vehicles buoys August’s strong car sales. Click Here for more.)
“This is not the first time we find ourselves in the midst of a crisis and having to rewrite our future,” he wrote, pointing to Fiat’s near-collapse in 2004, and giving workers a share of the credit for the revival that followed.
The company gambled again in 2008-2009 with its investment in bankrupt Chrysler Group, noted Marchionne. But his letter made it clear that workers will have to do still more to avert another setback as it moves ahead with plans for the Maserati SUV and possibly other new products at Mirafiori.
(Fiat’s Alfa Romeo brand threatens to shift production out of Italy. Click Herefor the inside story.)
“As I have said, this is a key decision which has the full support of the Chairman of Fiat, John Elkann. It is an act of courage in the face of decline, an act of faith in our future,” the Canadian-educated CEO stressed.
Marchionne originally announced plans to build a Maserati SUV in Detroit as part of an effort to turn Maserati and Alfa Romeo from niche brands into a global brands that could challenge rivals such as BMW and Jaguar/Land Rover.
While the strategic goals haven’t changed, the plan was altered as demand for Chrysler’s Jeep Grand Cherokee soared and the Jefferson North plant where the Jeep Grand Cherokee is built struggled to keep up with dealer orders – even with the addition of a third shift.
That forced Chrysler management to consider returning the Maserati Levante to Italy. But before giving approval, Fiat laid out demands for concessions, the maker eventually signing a contract with seven Italian unions authorizing more flexible work rules.
(Click Here for a first look at the new Maserati Ghibli.)
But an Italian constitutional court ruling forced Fiat to accept representatives of an independent union that has jousted with Marchionne in the past. FIOM, which is the metalworkers’ arm of the CGIL union confederation, is the only union to have refused to sign the new agreement. Despite that setback, Fiat appears ready to go ahead with production in Turin.
Few were surprised to see the majority of the unions accept the proposed concessions. The Mirafori plant’s 5,400 workers have been on rotating layoff at Fiat’s oldest and largest factory for the last two years.