FIAT on the Ropes

Over 11,000 workers may be downsized in the largest mass layoffs in Italy since the 1950s, as FIAT Auto threatens to close two plants and limit production in another. The largest Italian labor federation, CGIL, claims the firings will spread to include over 50,000 workers in affiliated industries.

The crisis is causing deep divisions within the center-right Berlusconi government, as two camps form around proposed resolutions of the greatest economic crisis to face the country in the past twenty years.


Last week, in a meeting with bankers and Finance Minister Giulio Tremonti, FIAT received support for its plan to shed 21% of its workforce to shore up its financial profile. After the meeting FIAT received further encouragement to shed costs from other Berlusconi cabinet members who made it clear the government should play no role in interfering with market processes.

According to the Governor of the Bank Italy, Antonio Fazio, FIAT is suffering the consequences of short-sighted government subsidies, unfeasible economic activity-referring to the many, diverse and completely unrelated companies of the FIAT empire- and questionable accounting practices. Other government officials who also blame FIAT for its current problems are unwilling to use public funds to bail out the company, even if it means that the car manufacturer could be bought by General Motors, which already owns 20% of its shares.

If the bankers and these ministers have their way, FIAT will effect its job cuts to shore up its finances and prepare for its eventual takeover by GM in 2004, when the U.S. giant can exercise the option of buying up the remaining 80% of FIAT Auto's shares.

Nothing could sound worse to the other half of Berlusconi's cabinet, his party's Sicilian wing, the opposition, and the unions, all of whom see the nation's car industry as an integral part of Italy's economy and are not willing to let it go without a fight.

Both the Minister of Welfare Roberto Maroni and Minister of Production Antonio Marzano have called on FIAT to come up with an industrial strategy that does more than just fire workers. Marzano further commented that considering his ministry's $2.3 billion investment in the company, the government should consider itself a shareholder and act in any way possible to ensure the company's continued existence.



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Some opposition parties want the government to nationalize the company, arguing that the loss of the car industry would be a loss of industrial sovereignty. These parties note that no industrial country is without a car industry.

FIAT's plan to close a Sicilian plant representing one quarter of the proposed layoffs has caused a rebellion within Berlusconi's governing coalition with, 61 Sicilian members of parliament threatening to boycott the upcoming government budget vote as a retaliation against the government's inaction.


Workers in the Sicilian plant have begun striking to save their jobs. During the last national strike on October 18 they carried banners saying "You'll cut, we'll strike!" The three major unions representing FIAT's workers have promised a two hour strike in solidarity with the workers in the threatened plants, along with a general strike before November 10 to protest car manufacturers' proposed layoffs.

The unions' counter proposal calls for a refinancing of the company with public money and a new industrial plan that guarantees employment at the current facilities. They argue that the company should be investing in research and development rather than focusing only on production to regain market share. At the same time, the unions point out that FIAT is producing less cars than the domestic market demands, which makes it a unique case among European car manufacturers, and should actually expand its capacity. Barring any change of heart from the company, the unions call on the government to intervene to relaunch the automobile sector as part of a national industrial policy.

In a country with deep regional divides, a national industrial policy is something the government is also eager to champion. The FIAT crisis is threatening to inflame the simmering north-south tensions. Workers and politicians in the north fear that political pressure to keep plants open in the south will cost them jobs. Their fears are justified by the government's hints that their policy toward the poorer south cannot be seen as legitimate if the Sicilian plant is allowed to close.

One cabinet member is on record as saying that he's not worried about the lost jobs in the north because that region's healthy labor market will easily absorb the downsized workers. Ironically, the voice of reason in this regional squabble is the Mayor of FIAT's hometown Turin, who said that Italians should do everything to prevent a war among the poor.

The poorhouse is exactly what is waiting for the Italian autoworkers if FIAT has its way. Since Italy has no unemployment insurance and the company is trying to get out of its obligation to pay out severance, many workers will find themselves without a job and without a penny. And if the progressive press is correct in its prediction that the government will not interfere in market dynamics, then Italy will likely be set for the greatest social confrontation since the end of World War 2.