With No Money For Chrysler, Fiat Finds "Hundreds of Millions" For Italian Production

At the urging of the Italian government, Fiat said today that it is willing to shift production of Pandas from Poland to the Pomigliano plant in Naples and invest “hundreds and hundreds of millions” in order to bring its Italian production to over 800k units per year. But, he warns, the Italian government must extend domestic consumer credits in order to sop up the increased capacity or face a rapid market contraction. As part of the deal, the government would allow Fiat to shut a terminally unproductive plant in Sicily, for as Sergio says, “the number of cars produced per worker [in Italy] is totally out of proportion” compared with plants in Brazil or Poland. “It doesn’t correspond with any industrial logic.” He’s right, of course, but you have to admit that it’s strange to see the man who took American taxpayers for a savage ride by snagging a bailed-out Chrysler without putting a penny down, suddenly bankrolling the oblivious nationalism of the Italian government.

After all, Sergio himself tells Automotive News [sub] that “we need an act of courage right now to take the weak points out of the system and concentrate on the strong ones.” But the current Panda/500 plant in Tychy produces 600,000 units per year, or about 50k less than all five of its Italian plants put together. Sure, if you eliminate the worst plant in Italy (by selling it to the Indians?) you’d improve the comparison a little, but there’s still nothing in this equation to suggest that moving production from Tychy (by all accounts, one of Fiat’s best plants) to any of the Italian factories would “take the weak points out of the system and concentrate on the strong ones.” An Italian analyst even tells Reuters “it would make more industrial sense for Fiat to move its Polish production to the Mirafiori plant, near Turin, in Italy’s richer north.”

Sergio is forever praising the capacity reductions which took place in the US auto industry bailout, and damning Europe’s overcapacity as unfinished business. But as soon as the Italian government asks nicely, he has $11b to spend to increase capacity in Europe? The guy who celebrates “industrial logic” and dismisses incentive-dependence in his own business is concentrating production in an insignificant corner of a shrinking market because the government might keep consumer incentives around for another few years? Or is it so hard to get even one Sicilian plant closed that Marchionne is willing to throw his rhetorical hobbyhorses out the window to solve a tiny part of the larger European overcapacity problem?

Marchionne has refused from day one to put a penny into Chrysler, an undeniably common-sense decision. But where the Italian government somehow has clout to part Sergio from hundreds of millions of dollars for job creation, American elected and unelected officials actually paid billions to gut Chrysler’s bloated capacity, lay off workers and otherwise reanimate the zombie automaker before handing it over to Marchionne. Are Marchionne’s principles mere window dressing for convenience, or was the Presidential task force simply some of the worst negotiators ever? Likely more than a little of both. Meanwhile, whatever happened to the European Union’s rules forbidding national governments from buying jobs out from under fellow member states?