23% decline in Italy gives company excess capacity at factories
Bryce G. Hoffman -
DETROITNEWS - July 14, 2012
As automobile sales in its home market continue to decline, Fiat SpA is hoping that increasing demand for its products in the United States will help keep its factories humming.
Last month, car sales in Italy plummeted more than 24 percent, and Fiat's sales were down by more than 23 percent. The rest of Europe is struggling, too.
Sergio Marchionne, chairman and CEO of Fiat and Auburn Hills-based Chrysler Group LLC, says the current situation is unsustainable.
"There is at least one extra car plant in Italy," he told reporters at Fiat's headquarters in Turin last week. "(But) if we manage to utilize the capacity to export to the U.S., this issue will disappear."
The only alternative is to close another factory, Marchionne said.
Fiat shuttered a plant in Sicily last year, and Marchionne has been calling on Italian unions to accept concessions on work rules similar to those already negotiated with the United Auto Workers in an effort to make the company's factories more competitive. But workers in Italy continue to resist these and other cost-cutting moves.
Fiat has also delayed the introduction of two new models in Europe to help keep costs down, and the company plans to cut its investment there by more than $600 million this year.
But unless auto sales rebound, Fiat will still be left with far too much capacity.
Boosting exports to America could really help with that but only if the company pursues an aggressive currency-hedging strategy, according to analyst Rebecca Lindland of IHS Automotive.
"In theory, it's a good plan...
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