Fiat to suspend production at Naples plant

AP News
Posted: Jul 18, 2012 1:34 PM

MILAN (AP) — Italian carmaker Fiat SpA announced Wednesday that it will extend its month-long holiday shutdown of its Naples plant by some two weeks due to slumping car sales in Italy that have hit the lowest levels in more than three decades.

Fiat said it will halt production of the subcompact Panda model to avoid "the useless and costly accumulation of vehicles" in a shrinking European auto market. The Italian market contracted nearly 20 percent in the first half of 2012, compared with a 6 percent decline overall in Europe, the carmaker said.

"The data for the European auto market, and that in Italy in particular, confirm that the crisis in sales shows no signs of ending," Fiat said in a statement. "In Italy, the market, which is at 1979 levels, is penalizing Fiat above all in the city car segment, where Fiat, with the Panda and the 500, hold a 60 percent share."

The decision will idle 2,150 workers at Fiat's state-of-the-art Pomigliano plant, which was retooled with an investment of €800,000 ($1 billion) to make the new generation Pandas, and raises fresh concerns about the future of carmaking in Italy. Union leaders have called for economic reforms to encourage consumer demand in Italy, where the financial crisis has hurt consumer spending, and a clear plan for the Italian auto industry.

Fiat shifted production of the latest Panda, one of the hottest-sellers in its segment, from Poland to Italy last year as part of earlier plans to boost production in Italy.

Fiat, which controls U.S. carmaker Chrysler, has been putting workers on temporary layoffs to deal with the overcapacity in its Italian plants, and has said it could suspend production to deal with diminishing demand. The company last year closed a plant in Sicily due to the higher costs of producing cars a distance away from its suppliers, and has indicated it may consider closing another plant if it can't come up with a viable plan to export cars to the U.S.

Fiat said it would continue to monitor the situation.

Giorgio Airaudo, a leader of the FIOM union that has clashed with CEO Sergio Marchionne over changes in the automaker's labor contracts, accused the CEO of misjudging the length of the crisis, investments in plans and products.

"We need a plan to save the car industry in Italy, which is worth 11 percent of GDP," Airaudo said in a post on Twitter.

Giuseppe Terracciano of the Fim Union called on European and Italian officials to come up with reforms that will relaunch the economy and encourage consumer spending.

"Incentives to buy a car are not enough, but merely drug the market and don't resolve the issues of the sector," Terracciano said.