Marchionne says Fiat investment plans up for grabs

Associated Press

MILAN (AP) — Fiat and Chrysler CEO Sergio Marchionne said Tuesday his plans to invest to ramp up Alfa Romeo and Maserati production in Italy was "up for grabs" after a court ruled a key labor statute unconstitutional.

Marchionne told an analyst conference that he has urged the government to draft legislation to create some certainty for Fiat, Italy's largest private sector employer, but "I have seen nothing yet."

The constitutional court ruled in early July that a labor statute that limits unions operating within a company to those who have signed collective work contracts violates the constitutional protection of union freedom. The ruling was the result of a challenge by the FIOM union, which has refused to sign more flexible labor agreements sought by Fiat as a condition for new investments.

Marchionne said the decision has triggered a lack of certainty in regard to plans to raise production of higher-margin luxury cars in Fiat's underutilized Italian plants for the export market.

"If the industrial conditions in Italy remain such that it is impossible to properly govern the industrial operations in this country, then obviously any commitment we made to this country is up for grabs," Marchionne said. "We are still trying to understand the implications of the latest court ruling on what Fiat is doing in Italy."

The court's ruling could impact operations on the Pomigliano plant, where Fiat invested 800 million euros to build the new Panda, as well as plants in Turin. Marchionne said he was seeking a meeting with the head of the FIOM union.

Europe's recession, along with plummeting sales in its domestic Italian market, have continued to weigh on Fiat's results. Fiat on Tuesday said strong sales by its U.S. subsidiary Chrysler came to the rescue again, as it reported a quadrupling in second-quarter net income.

Fiat, which is based in the northern city of Turin, said net profit for the three months ending June 30 was 142 million euros ($188 million), up from a restated profit of 32 million euros in the same period last year. Without Chrysler, in which Fiat holds a majority stake, the Italian company would have lost 247 million euros, as European sales dropped 5 percent.

Fiat shares dropped 4.7 percent to 6 euros in Milan trading.

Worldwide car shipments were up 5 percent in the quarter to 1.2 million units, more than half of those Chrysler brands. North American sales rose 4 percent, while Asia and Latin America posted double-digit growth.

Fiat sold 234,000 passenger cars under its mass-market Fiat, Lancia and Alfa Romeo brands in the quarter. Its market share shrank 0.5 percentage points to 6.3 percent "reflecting the continued reduction in Italy's overall weighting in the European market," Fiat said.

Revenues for the quarter were 22 billion euros, up 4 percent over the previous year.

Marchionne said Chrysler results showed "the machine is back on," but he acknowledged the second half of the year will be a challenge due to the cost of new Chrysler product launches.

In the United States, Chrysler Group's sales picked up in the quarter on strong demand for trucks and SUVs, hitting 643,000 vehicles with growth outpacing the industry average. Still, Chrysler cut its full-year sales and profit targets after a slower than expected start to the year.

Chrysler said it now expects to ship 2.6 million vehicles worldwide in 2013, at the low end of its target of between 2.6 million and 2.7 million. It expects to earn between $1.7 billion and $2.2 billion, down from its previous target of around $2.2 billion.

Fiat took the majority stake in Chrysler in 2009, however its efforts to buy out a minority stockholder have been stymied by a disagreement over a price. A court in Delaware is deliberating Fiat's petition to put a value on an initial 3.3 stake, which will form the basis for determining the value of further shares.

The Italian auto group cut European trading losses — or losses before interest, taxes and one-off items — by 40 million euros to 98 million euros, thanks to cost cutting and the success of the larger version of its popular 500 model, the 500L, which sold 18,000 units in the quarter.

The carmaker's luxury brands contributed 105 million euros thanks to performance sportscar maker Ferrari. Maserati dipped due to costs associated with the launch of the new Quattroporte.

Fiat confirmed its 2013 targets of a trading profit between 1.2 billion euros to 1.5 billion euros on revenues of at least 88 billion euros.

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