September 4, 2013 5:08 pm

Fiat plots road to recovery in Italy with focus on luxury

Fiat is pushing ahead with plans to make Italy the hub of its premium and luxury car business after chief executive Sergio Marchionne struck a long-awaited deal with unions over extended lay-offs.

The Italian carmaker, which owns a 58.5 per cent stake in Chrysler, is betting the future of its production in lossmaking Italy on the export of its Alfa Romeo, Maserati and Jeep premium and luxury cars in an attempt to tackle the problem of overcapacity and a slump in demand in Europe.

In a statement, Fiat said that it would press ahead with investment in the Mirafiori plant in its home city of Turin, having gained union backing for extending lay-offs for 5,300 workers this year. Union leaders said the investment would be worth about €1bn and would be focused on the production of a premium-marque Maserati sport-utility vehicle.

Fiat’s gamble on investing in Italy comes at a time of accelerating foreign takeovers of the country’s best known consumer brands as acquirers, many of them French and German, see an appetite among US and Asian consumers for higher end Italian products.

Luxury goods groups Loro Piana, Pomellato, Bulgari, Brioni and Valentino and consumer groups Parmalat, Findus Italy, Marazzi and Bertolli have been bought in the past five years. Germany’s Audi acquired the elite motorbike maker Ducati in 2012.

Mr Marchionne is seeking to harness some of that consumer allure for Fiat. At the Detroit motor show this year, Fiat launched a Maserati Quattroporte. It is the first of a series of premium cars that Mr Marchionne argues will turn around Fiat’s plunging fortunes in Europe.

Fiat hopes that 14 new Maserati, Alfa Romeo and Jeep models it is planning to launch will use up some of its more than 50 per cent of excess manufacturing capacity in Italy, stave off plant closures and attract new customers in faster-growing China and the US.

Analysts consider Mr Marchionne’s focus on premium production to be a do-or-die strategy for the carmaker in its home market. He had threatened to quit Italy if unions failed to agree to his plans. An existing lay-off agreement expired this month and Fiat wanted the workers to be laid off for the rest of the year.

The timing is crucial. European carmakers expect falling sales may level out in 2014 amid some signs of improvement in the battered industry. European car sales fell by 6.6 per cent to the end of July compared with the same period a year ago. Fiat halved its European operating losses in the first half.

Claudio Chiarle, head of union Fim-Cisl in Turin, said the investment plan was a fundamental step for industry in Turin and would allow many families to have “a future and concrete prospects . . . after years of sacrifice and economic suffering”.

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