Updated: March 24, 2010 2:04 PM | By Alessandra Rizzo, THE ASSOCIATED PRESS, cp.org

Report says Fiat to cut jobs, raise production, but company says speculation is premature



ROME - Fiat dismissed as "premature" a report Wednesday by an Italian newspaper saying the automaker will cut 5,000 jobs, slash the number of car models and increase production in a business plan to be unveiled next month.

Fiat said in a statement that it was working on the 2010-2014 plan and that any media speculation was "absolutely premature and groundless." It defended its efforts to avoid laying off workers.

"We are still working," Fiat CEO Sergio Marchionne said in Turin, according to the ANSA news agency. "It's just speculation in the papers, and whatever I might say would be incomplete."

The company, which sealed an alliance with Chrysler last year, is set to present its highly anticipated plan to investors on April 21.

Italian newspaper La Repubblica reported the cuts would affect about 15 per cent of the 30,000 assembly line workers at Fiat. They would include between 2,000 and 2,500 workers at the historic Mirafiori plant in Turin and some 1,500 employees at the Termini Imerese plant in Sicily, which will stop auto production next year. Overall, the cuts would affect four plants in Italy.

Fiat said in its statement that it had done all it could to avoid layoffs.

"Even in the presence of very tough international markets in the auto sector, Fiat, seeking to avoid layoffs, has made every possible effort to alleviate the consequences of the crisis on its workers," the company said. It added that it had resorted to some 30 million hours of temporary layoffs to avoid permanent ones.

The report in La Repubblica immediately sent Fiat shares up in Milan and had unions and some politicians express concern.

Union leader Gianni Rinaldini told ANSA that, if confirmed, the figures of laid off workers would be "worrisome and unacceptable." He called on the government to open talks with Fiat.

Marchionne was vehement in his defence of Fiat.

"It's the deepest crisis we have seen in Europe and we haven't laid anybody off," he said. "To attack Fiat this way in a moment like this is the most disproportionate thing I've ever seen. It's almost shameful."

According to the report, Fiat also plans to cut the number of its models from 12 to eight, but increase auto production in Italy by 50 per cent to 900,000 cars. The newspaper said Fiat plans to launch and produce in the United States seven models under the Fiat, Lancia and Alfa Romeo brands. This would bring U.S. production to 350,000 cars, according to the report.

Repubblica also said that a spinoff of the automobile unit might take place as soon as this summer. The report follows widespread speculation recently over a possible spinoff and about the role of the controlling shareholder, the Agnelli family, in the future of Fiat.

The statement reiterated the Fiat position that it will address the question of the spinoff when it presents its plan next month.

Fiat took a controlling 20-per cent stake in Chrysler Group LLC last June, as the U.S. automaker emerged from bankruptcy, in exchange for small car technology and management leadership.

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AP Business Writer Colleen Barry in Turin, Italy, contributed to this report.

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