Italy’s largest private employer automotive maker Fiat has no plans to close factories in Italy despite CEO Sergio Marchionne’s predictions for a very bad car market in 2013.
Marchionne met with senior Fiat executives and members of the Italian government to discuss ways to improve Fiat’s manufacturing efficiency so it could keep investing in Italy and benefit from the aid of state subsidies.
Fiat plans to focus on exports outside of Europe, including integrating Fiat with its US unit, Chrysler, although full investment plans will not be announced before the end of October.
Fiat Factories At Less Than 50% Capacity
Currently, Fiat factories are operating at less than 50% capacity, with production halted on and off. This mode of operation is expected to continue through the rest of 2012.
Unions are concerned about job cuts should the factories eventually close. In Italy, nearly 200,000 people are employed in the auto industry, yet sales are the lowest they have been in 40 years.
Marchionne says he does not believe the market will improve until 2014.
Fiat Investment Plans
In 2010, Fiat released a five-year plan that included $21 billion in investments, a fraction of which were Italian investments. Fiat says it is unrealistic to think the plan would not change, and in August stopped all planned investments.
So far in 2012, Fiat has lost $905 million, a figure higher than predicted for the entire year, yet the company remains profitable because of Chrysler.
The European economy has hit the car market hard, and in August, car sales fell 8.5%. All European car manufacturers are faced with a similar problem. There are more factories than there is market demand, and closing factories is costly and has political side effects.
Nonetheless, competitors General Motors and Ford are considering closing European plants.
The Italian economy has not seen growth in a decade; the first half of this year alone industrial output fell by 7%. The nation has been affected by the euro crisis and by globalization, and in addition, Italy has been experiencing strikes and high unemployment.
Key Statistics - Automotive Manufacturing in Italy (source: MarketLine)
- In 2011, the automotive manufacturing industry in Italy had revenue totaling close to $17 billion. For the timeframe 2007-2011, this represents a CARC (compound annual rate of change) of -8.5%.
- Between 2007-2011, the industry’s consumption volume decreased at a CARC of almost 12%. In 2011, consumption volumes reached over 1.2 million units.
- For the five-year period 2011–2016, the industry’s performance is predicted to accelerate, with a compound annual growth rate (CAGR) of over 2.5%. By the end of 2016, the industry is expected to be valued at $19 billion.