Fiat Auto will launch its fourth temporary layoff program this year to match production with declining sales. Italy’s strict labor laws mean that Fiat cannot reduce its manufacturing network. The Italian government now needs to address this problem with more than just temporary solutions.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Fiat Auto Group, the troubled Italian vehicle manufacturer, has announced a temporary layoff program to start in April in order to slow down production of several models in line with demand. Around 2,500 workers will be sent home for two weeks from April 12. The group will suspend production of the Lancia Thesis, the Lancia Lybra estate, the Alfa 166 and the Multipla model at its Mirafiori plant in Turin.
Fiat is taking full advantage of the Italian government’s temporary layoff scheme, as this is its fourth temporary layoff program this year. This scheme enables workers to remain officially employed at a company while not working but receiving a reduced salary, which is paid for out of the state’s ‘Special Layoff Benefits Fund”. Under this scheme, Fiat can lay workers off temporarily for up to 52 weeks over two years. So far this year, the group has already sent a total of 6,300 people home over five weeks on reduced pay.
These temporary layoffs are not good news for the Fiat Group. The layoff scheme creates an atmosphere of uncertainty among the employees, who fear for their long-term prospects and it could lead to strikes in the manufacturing plants. Despite all Fiat’s recent restructuring efforts, the company still suffers from big overcapacity problems. Excessive production and under-used manufacturing facilities are major factors behind the Italian group’s losses in recent years. However, the group can do very little because of the restrictive Italian labor laws.
The Italian carmaker has recently experienced a dramatic fall in customer loyalty, especially in its key home markets. In 2003, sales in the group fell almost 9% compared to the previous year. It seems that until Fiat Auto is allowed to make some drastic reductions in its manufacturing network, there is really very little that it can do to improve profitability.
SOURCE: DATAMONITOR COMMENTWIRE (c) 2004 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
