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When judges in Termini Imerese sentenced seven men for Mafia crimes three weeks ago, locals were quick to point out that none was from the Sicilian town itself.

Throughout Sicily, such civic defensiveness is understandable. But it often appears tantamount to denying the existence of gravity: part of the convicted men's illegal activities took place in Termini, 35km (22 miles) east of Palermo. That is clear from the testimony of Antonino Giuffre, a high-level capo who was captured two years ago and who, according to a person familiar with his evidence, began to detail the activities he oversaw in the area, including Termini itself.

Termini citizens are particularly touchy for another reason. Two years ago, Italian motor manufacturer Fiat, facing bankruptcy, threatened to shut its plant there for a year and dismiss nearly 2,000 employees, equal to one in every 15 inhabitants in a town where 25 per cent are unemployed. Fiat workers and their wives and children took to the streets, with several wailing, perhaps melodramatically, that their only alternative was to turn to organised crime. Even though more jobs were threatened elsewhere in Italy by Fiat's restructuring, politicians in Rome made Termini their focal point. The town came to symbolise not only the odd reality of Sicily's economy but also the nation's fears over the carmaker's troubles.

Today, the plant is still open, although several hundred jobs have gone. The Fiat plant's future, however, remains uncertain, even if the company now promises to keep it open indefinitely. Fiat Auto, the group's car division, continues to lose money and could eventually be sold.

The Fiat factory, and the town itself, remain a weathervane for the carmaker and for Italy's economic and political future. Sergio Marchionne, who in June was appointed Fiat's fifth chief executive in two years, recently admitted that the group would need an extra year to become profitable and that more -sacrifices were necessary.

The centre-right government of Silvio Berlusconi, meanwhile, is scrambling to keep control of the island's political machinery. After capturing all 61 parliamentary seats in elections in 2001, Mr Berlusconi's coalition lost numerous local offices - including that of Termini's mayor - in recent elections.

Mr Berlusconi promises to spend at least €4.6bn ($5.6bn) to build a bridge between Sicily and the mainland by 2011. Political opponents say the project, in a region prone to earthquakes, will mostly serve to grease the hands of organised crime. Locals scoff at its promised economic benefits, noting that it would take another €5bn to develop enough industry to make the bridge economically useful. “Tourists fly or take high-speed boats. They won't drive all the way south just to take a bridge,” says one Fiat worker.

A different owner of Fiat's Termini plant might much more easily brush off political pressures and close the factory, bridge or no bridge. Financially, the Termini plant has no reason to exist. Its relatively small size and the cost of shipping in most supplies and shipping out most of the product makes profitability virtually impossible to attain.

“I've never had anyone properly explain to me why we have a plant there,” complained Paolo Fresco, Fiat's chairman during the Termini protests, shortly before he was fired.

The generic answer is: politics. In the 1960s, the government sought to develop the Sicilian economy with large industrial projects. The large plain that Termini dominates, and which was famous for its tasty artichokes, looked perfect for a chemical plant, a power plant and a car plant.

Ostensibly, the plants were meant to create steady, honest jobs and offset the influence of Mafia-controlled small industries.

Instead, many of the contracts to build the plants went to construction companies owned by organised crime. As with many similar projects of the period, Termini Imerese lost its picturesque coastline and was given Italy's proverbial “cathedrals in the desert”. A few miles east of Termini, along the coast, a sprawling shell of a factory, never fully completed, sits near Fiat's plant. The highly automated Enel power plant, meanwhile, employs a few dozen workers.

The town itself hosts a nearly deserted industrial port with a vast swath of asphalt used by a few dozen trucks and containers. At the western end, near an abandoned olive oil refinery and a small sulphur plant, lies a small beach.

“We should have developed tourism, but that wasn't politically expedient at the time,” notes Luigi Purpi, Termini's centre-right mayor until last May. “One mayor blocked a project for a Club Med because he said he opposed seeing women in bikinis. But it was really all about money and jobs.”

The Fiat plant itself, opened in 1970, is the lone hive of activity. Its relatively high dependence on other Fiat plants on the mainland, and a corporate policy to rotate top managers every two years or so, keep it out of reach of organised crime.

But with 1,400 workers and output of about 100,000 cars a year, it is a fraction of the size of the car industry's most efficient plants, including Fiat's Melfi plant on the mainland, which produces 450,000 cars with 5,000 workers a year. Because of transport costs alone, the plant's three-door Fiat Punto costs €200 more to produce. For a car retailing at about €12,000, that wipes out profitability at the source.

Still, Fiat keeps trying. Termini Fiat's managers take great care to explain to visitors how each stage of the assembly line has increased productivity during the past year.

Following the showdown two years ago with employees, Fiat has installed a highly detailed ergonomics system, TMC2, that measures to the centimetre and second the movements of each worker on the line. TMC2, first applied at other Fiat plants more than 15 years ago, so far has boosted productivity by some 5 per cent; that and other measures have also partially undone 30 years of labour rules and should reduce to 18 hours, from 20, the time needed to produce a Punto.

The result is continued labour grumbling, although for now even the leaders from the most militant units of Italy's vast array of trade unions appear content to try out the new system.

Roberto Mastrosimone, a member of the leftist CGIL union, says: “The problem is the work rhythm becomes too stressful.” He adds that the average age of workers at the plant is 45 and that three-quarters have problems with herniated discs.

Still, Mr Mastrosimone and other labour leaders say they are willing to apply new approaches at the plant in order to save jobs. They also admit that the several hundred workers who received early retirement and other benefits are more than glad to be working no longer, contrary to the cries that went up in the streets two years ago.

"They're all happy,” says one worker representative. “They have their income, their pension and they're working more in their little plot of land.”

Indeed, while the official unemployment rate may be 25 per cent, the real proportion of unemployed working-age adults is probably between 10 and 15 per cent, regional administrators say.

As in the rest of Sicily and the south of the mainland, perhaps a quarter of jobs are in the black market.

“People earn €500 or €700 a month,” says another Fiat union representative. “That's not very much, and it's not always steady work, but it's often supplemented by [state] benefits.” Enzo Giunta, Termini's centre-left mayor since June, when he defeated a member of Mr Berlusconi's Forza Italia party, hopes the town and the region will at last develop its tourist industry. Termini itself has spruced up parts of its old centre in recent years: the dowdy but grandiose Grand Hotel delle Terme draws a steady stream of tourists eager for the thermal baths, and archaeological sites abound.

Mr Giunta's road ahead, however, is long. Days after he took over as mayor, he put up posters outlining the town's finances. Among the items: funds for tourism promotion - €23.85; funds for cultural activities - €66; city debt - €19,156,303.80.

Not dissimilar to Fiat Auto's state of affairs.

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