Fiat halts new investments pending clarity on labor law

Published July 09, 2013

| Reuters

Fiat SpA will put new investments on hold until it gets a clearer idea of the impact of a court ruling that a portion of Italy's labor rules are unconstitutional, its chief executive, Sergio Marchionne, said on Tuesday.

Italy's constitutional court ruled last week that a clause in the country's labor law from the 1970s allowing automaker Fiat to bar the Fiom metalworkers' union from representing workers on its factory floor violated the constitution.

Fiat is Italy's largest employer, and its billions of euros in new investments are crucial to bolstering the country's economy, which has been in recession for two years and suffers from record unemployment.

Struggling Italian companies received another setback on Tuesday when Standard & Poor's cut the country's sovereign credit rating to BBB from BBB-minus, a move likely to drive up borrowing costs.

LABOUR CONTRACTS IN DOUBT

Since 2010, Fiat has rolled out investments at some of its Italian factories in exchange for concessions from labor unions for more flexible work conditions.

Fiom did not support the new contract, and it started legal proceedings against Fiat that led to last week's court ruling.

Marchionne said the ruling throws its labor contracts in doubt, since they are based on rules that the court has found, in part, unconstitutional.

"Before taking any further initiatives in Italy, we need a clear legal and normative framework," he said, in a speech announcing over 700 million euros in planned investment.

Marchionne said he was open to meeting with Fiom leader Maurizio Landini to discuss what measures could be taken, based on a common understanding that Fiat's 2011 labor contract would not be revised.

Speaking later on Tuesday in Turin, Marchionne asked the government to propose a solution for the uncertainty created by the court ruling. Marchionne expects to have a better idea of the consequences of the ruling when the court releases the reasons for its decision.

"I am not willing to invest more risk capital in this country if we don't know on what basis we can carry out our labor relations," he said. "It's the government's responsibility to ask the court for clarity."

In the meantime, Marchionne threatened to build planned new Alfa Romeo models outside of Italy.

"We are going ahead with the re-launch of Alfa Romeo, it's up to Italy to decide whether the cars will be built here or elsewhere," he said.

($1 = 0.7773 euros)

(Reporting by Alberto Sisto, writing by Jennifer Clark. Editing by Jane Merriman)

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