Fiat Signs One-Year Labor Deal for Workers at Italian Plants

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Fiat SpA and Fiat Industrial SpA signed a collective labor deal with their 86,000 Italian employees that increases shifts and shortens breaks in exchange for a 20-billion euro ($26 billion) investment plan.

Workers’ base salary will rise 5.2 percent, Roberto Di Maulo, head of the Fismic union, said in a telephone interview from Turin. Employees will also receive a 600-euro production bonus in 2012 and be paid 10 percent more for overtime, he said.

“The agreement signed today signals a historic moment for our company and its workers,” Chief Executive Officer Sergio Marchionne said in an e-mailed statement without providing the agreement’s financial details.

The one-year contract, which goes into effect in January, is part of Marchionne’s strategy of raising productivity at Turin, Italy-based Fiat’s domestic plants as he aims to end losses in Europe by 2014. Italy’s inflation rate calculated using European Union standards declined in November to 3.7 percent from the three-year high of 3.8 percent in October.

Fiat closed up 1 cent, or 0.3 percent, at 3.76 euros in Milan trading. The shares have dropped 44 percent this year, valuing the carmaker at 4.71 billion euros. Fiat Industrial closed up 8 cents, or 1.2 percent, at 6.29 euros.

Capacity Utilization

Burdened by a dearth of new models, capacity utilization at Fiat’s Italian plants was just 38 percent in the first nine months of 2011, compared with 76 percent at the carmaker’s other European factories, according to a Dec. 8 company presentation.

“Labor flexibility only helps if your plants are close to full capacity,” said Erich Hauser, a Credit Suisse analyst in London with an “underperform” rating on Fiat shares. “With 30% plant utilization ratios, I struggle to see the benefit of having a more efficient labor force. Labor costs seem to increase with the new contract.”

The deal will apply to new hires as well, Di Maulo said. Fiat workers will have to ratify the agreement at every plant, where the unions will hold votes over the next two months, a spokesman or the Uilm union spokesman said.

Fiom Cgil, the carmaker’s biggest union and the only one not to sign the agreement, has claimed the deal curtails worker rights. It led an eight-hour strike yesterday at the company’s Italian plants. The union’s roughly 10,000 workers will nonetheless fall under the agreement if it’s ratified.

Chrysler Rebound

Some 22,000 factory workers in Italy assembled 650,000 cars in 2009, while the 6,100 employees at Fiat’s plant in Tychy, Poland, built 600,000 vehicles. Without taking into account differences in models or working hours, Fiat’s Italian workers made 30 cars a year on average, compared with almost 100 in Poland.

Rebounding sales at Chrysler Group LLC, which Fiat controls, are helping prop up the Italian automaker. Third-quarter earnings before interest, taxes and one-time items, which Fiat calls trading profit, rose to 851 million euros from 256 million euros a year earlier, with the U.S. company contributing 65 percent to the overall result. Fiat fully consolidated Chrysler’s results from June.

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