Fiat has asked the government to approve a special lay-off scheme at its Melfi plant in southern Italy for two years to restructure the plant before production of new models begins, the car maker said on Tuesday.
The scheme will kick off on February 11 and last until the end of 2014. It will allow the company to stop one line at a time out of two at the plant, Fiat said.
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Melfi, one of Fiat's most important facilities in Italy, currently manufactures the Punto model.
Back in December, Fiat said it will invest 1 billion euros ($1.3 billion) to produce a new Jeep and a new Fiat 500 in Melfi, southern Italy, from 2014.
Like other car makers, Fiat, which controls U.S. carmaker Chrysler, has been hard hit by Europe's debt crisis. Last year car sales in Italy slumped to their lowest level since 1979.
Government spending cuts and high unemployment have hit consumer budgets and sent demand for cars plunging in an industry that suffers from overcapacity.
(Reporting By Gianni Montani)