Italian automaker Fiat SpA (FIATY.PK), which recently took a 20% stake and management control of automaker Chrysler LLC, said Thursday that it will end production of cars at one of its five plants in Italy and define a redundancy plan for its agricultural and construction equipment unit CNH Global NV (CNH), as part of its efforts to cut costs and deal with the economic crisis. The company also called for a "serious restructuring" of the automobile industry, saying it was now absolutely necessary if the industry is to be economically viable.
At a meeting held Thursday with representatives of the Italian government, local officials and trade unions, Fiat's Chief Executive Officer Sergio Marchionne outlined the company's current situation and medium-term industrial plan, with particular focus on its plants in Italy.
Fiat, the largest vehicle manufacturer in Italy, said it will continue with the the production of the Lancia Ypsilon at its Termini Imerese plant in Sicily only until 2011 and added that it will maintain an industrial presence at the plant with "non-automotive production activities." The plant employs 1,200 people. Workers at the facility had gone on strike in May, fearing the plant would be closed as the company had idled the plant for five of the past eight months.
The company also said it will continue to make its Alfa Romeo cars at its Pomigliano plant near Naples until at least 2010, with plans for a subsequent assignment of a new car production platform.
The company noted that the global crisis has further aggravated the problem of production overcapacity that has been plaguing the automotive industry for years. Saying that the operational, industrial and economic measures that were employed by the company to date are no longer sufficient by themselves, Fiat called for far-reaching strategic measures to achieve an adequate level of critical mass, increase volumes produced for each platform and to expand its geographic presence.
According to Fiat, the alliance with Chrysler forms part of such a strategic approach. The company noted that its combination with Chrysler has created the sixth largest automaker worldwide.
Fiat said that during the first five months of 2009, it recorded a 3.8% decline in sales in Western Europe, where the overall market fell 12.8%. However, the group's share of the market rose nearly one percentage point to 9.3%.
Fiat added that in the first quarter of the year, demand for trucks and commercial vehicles fell nearly 40% in Western Europe, with declines in all major markets at levels never seen before. The company's Iveco commercial trucks' market share fell half a percentage point, partly due to its decision to defend margins, with particularly negative performance for heavy vehicles, Fiat said. The company noted that across Europe, all heavy vehicle manufacturers experienced declines with the total volume of new orders falling 80% over 2008 levels.
Moving on to the company's agricultural and construction equipment unit, CNH Global, Fiat noted that global demand for construction equipment fell 57% in the first quarter, with the decline most pronounced in Western Europe. The company's Imola, Lecce and San Mauro plants in Italy were significantly impacted by the sharp drop in demand. Looking ahead, Fiat said that production volumes for the year are expected to be at levels that would be difficult to sustain. The company noted that workforce utilization for the first four months of the year was, on average, below the 40% mark.
"Current market performance, medium-term expectations and the significant under-utilization of production capacity necessitate a thorough reorganization of the business, rationalization of existing production sites and definition of a plan to manage redundancies," Fiat said.
The company said that the global agricultural equipment market also recorded negative performance, with demand for tractors down 10% and demand for combine harvesters down 23% in the first quarter of 2009. However, the company noted that Case IH and New Holland performed in line with the market.
CNH, short for Case New Holland, was created in 1999 after the merger of New Holland N.V. and Case Corp. It is a majority-owned subsidiary of Fiat
Fiat's CEO Marchionne, said, "But the time has also come for everyone to acknowledge that significant milestones can only be achieved by joining forces. Maintaining equilibrium in employment levels in the face of these extremely difficult market conditions is no easy task. The production-related initiatives that we outlined today will contribute in part to achieving this target, but they also need to be financially viable."
Marchionne added, "At the same time, there are other contributing elements which are equally important, such as: being able to rely on eco-incentives in Europe that are truly effective in stimulating demand; having continued access to temporary layoff schemes, indispensable tools for managing temporary production stoppages and reorganizations, which current demand levels have made unavoidable; and, rigorous containment of overhead costs and the ability to respond to changes in market conditions in a timely manner."
Last week, Fiat took a stake and management control of Chrysler after that company emerged from bankruptcy protection. The new company operates under the name Chrysler Group LLC, with the majority stake of 55% held by a healthcare trust aligned with the United Auto Workers Union. Fiat currently holds 20% of the new company, which could be later raised to 35% on satisfying certain milestones. Marchionne was named Chief Executive Officer of Chrysler Group LLC.
The deal is expected to enable Fiat to provide Chrysler with its world-class technology, platforms and power-trains for small- and medium-sized cars, allowing Chrysler to offer an expanded product line including environmentally friendly vehicles that are increasingly in demand. Chrysler will also benefit from Fiat's management expertise in business turnaround and access to Fiat's international distribution network with particular focus on Latin America and Russia.
According to reports on Wednesday, Chrysler will resume building cars and trucks at seven of its eleven North American assembly plants later in June. The company had shut down all of its plants shortly after filing for bankruptcy protection at the end of April.
In Thursday's trading session, FIATY.PK is trading at $9.85, down $0.15 or 1.50% on a volume of 362 shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.