MILAN/ROME (Bloomberg) – Italy's Prime Minister Silvio Berlusconi was meeting with Fiat S.p.A. CEO Sergio Marchionne on Friday to discuss Fiat's future plans.
Marchionne needs to reassure Berlusconi that he isn't planning to move Italy's biggest manufacturer a month after winning government backing in a battle with unions over labor concessions.
Marchionne, 58, caused a stir in Italy this week when he said Feb. 4 the Turin-based carmaker and Chrysler Group may “end up looking like one entity,” possibly based in the U.S.
The CEO later backtracked, saying no decision has been made. Fiat owns 25 percent of Chrysler.
“Integration with Chrysler may lead to new combinations, so it's crucial to stress the importance now of a prominent position for Italy,” Labor Minister Maurizio Sacconi, who will attend the meeting and spoke with Marchionne last week, said in an interview.
“The government wants to verify with Fiat's management the status of the Italian investment plan.”
Fiat plans to build as many as 280,000 cars and SUVs a year for the Jeep and Alfa Romeo brands at its Mirafiori plant in Italy starting in 2012 as part of a Chrysler venture.
Under the deal with unions, workers will put in more hours, take shorter breaks and risk having pay withheld for persistent absenteeism.
The Mirafiori deal is part of a 20 billion-euro ($27 billion) investment project to revamp Fiat's five Italian car plants, where it aims to produce 1.4 million vehicles a year by 2014 from 650,000 in 2009.
In addition to the meeting with Berlusconi tomorrow, Marchionne will also speak about those goals at a parliamentary hearing in Rome on Feb. 15.
“The government is moving too late, but better late than never,” said Federico Bellono, the local head of the Fiom union in Turin, which opposed the Mirafiori agreement. “Marchionne is more oriented strategically toward the U.S. than Europe.”
After Italy's main newspapers all printed Marchionne's comments about a move to the U.S. on their front pages, Chairman John Elkann on Feb. 5 was forced to qualify the CEO's remarks, saying that Fiat would never abandon Turin, where it's been based for over a century.
Italians' concerns that a combined Fiat-Chrysler may locate its headquarters in the U.S. are overblown, Marchionne said Feb. 9 in an interview at the Chicago Auto Show. No decision has been made on governance or a headquarters location, he said, adding that the issue won't be on his agenda before 2014.
“Marchionne is taking the money and running to the U.S.,” former public works Minister Antonio Di Pietro wrote in a post on his website. “Where are the 20 billion euros?”
Fiat is trying to improve productivity and capacity utilization to restore profitability in Italy, still the carmaker's biggest market.
None of the profit in 2010 came from Italy, Marchionne said. The automaker may lose 814 million euros in Europe in 2011, according to Kristina Church, a London-based analyst at Barclays Capital.
Chrysler could earn as much as $500 million in net income this year, its first profit since bankruptcy in 2009, the company said Jan. 31.
Marchionne has said he wants to take Chrysler public in the second half of 2011 and that he'll need two quarters of profitability before he can do it.
“Marchionne is playing two different games, one in the U.S. and the other in Europe,” said Giuliano Noci, a professor at the MIP Management School of Milan's polytechnic university. “In North America he's creating consensus on Chrysler before its initial public offering, while in Italy he needs to shock the country into creating a more competitive environment.”