Fiat plans to create 1,251 jobs in three Italian car plants as part of its recovery plan with the government meeting about 12% of the €1.25 billion cost, Italy’s industry ministry reportedly said.

Under a turnaround plan drawn up in 2003, Fiat will hire 1,600 people in Italy over the next four years although there will be a net loss of jobs as 2,800 posts are due to be cut, Reuters said.

A Fiat spokesman reportedly said the new workers would be hired gradually until 2007 as the three factories near Naples start making new cars that Fiat is pumping out to reverse a sales slump and pull out of its worst-ever crisis.

Melfi, Fiat’s most efficient plant, will be dedicated to making the Punto from later this year with a new version of Fiat’s best-seller due out in 2005, the report added.

According to Reuters, the Pomigliano D’Arco plant will build the new Alfa Romeo 156 due out next year and a facelifted version of the sporty Alfa 147 – Cassino, which currently makes the midsized Stilo, is slated to get the new estate car due out in 2005.

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The Industry Ministry reportedly said it would put €151.8 million ($US186 million) towards the project, the latest in a series of state handouts Rome has given Fiat to develop industry in the poorer south.

The ministry said its contribution was the maximum allowed under European Union rules on state aid to the auto sector, Reuters noted.

In the 2003 turnaround plan cited by the news agency, Fiat said it would invest €9.1 billion in new products across its car-to-tractor range between 2003-2006 – another €7.9 billion was earmarked for research and development.

Reuters said Fiat’s new top managers are due to meet unions next week to discuss their plans and prospects.

Unionists reportedly have already threatened they will strike in the autumn if they do not like what they hear – workers in Fiat’s home town of Turin are particularly worried that they will lose out to factories in the south and abroad.