Fiat Reportedly Presenting Spin-Off Plans to Banks, Workers to Vote at Pomigliano Plant Today

Around 5,100 workers at Fiat's Pomigliano d'Arco plant located in Southern Italy are to vote today between 0800 and 2100 on the future of the facility. Staff will vote on new terms which have been laid out by the automaker that will secure 700 million euro (US$866.9 million) of investment and production of the next generation of Panda from 2012. In order to win support for the new deal, Il Sole 24 Ore has reported that workers were handed DVDs yesterday made by the plant manager, Sebastian Garofalo, to explain the terms of the agreement.

The automaker's chief executive officer (CEO) Sergio Marchionne is remaining firm on the new working conditions and continues to hold what he calls "Plan B" in reserve. However, adding to the importance of the vote, it has been reported by ANSA English Media Service that Marchionne has said that "Plan B" could be implemented if less than 80% of staff vote in favour of the deal, which would place management in a position to neutralise the position of the FIOM metal workers union.

The FIOM remains unwavering in its views on the proposed contract, which has already been agreed by four other unions. It continues to claim that the deal is unconstitutional, and the head of the FIOM, Maurizio Landini has said in recent days that the automaker is "blackmailing" workers. He said "This is blackmail. The workers are being asked: do you want to work or close the factory? It's like saying: do you want to live or die? It's obvious that they will choose to live." Landini added that a condition with regards striking would be taking away "a right recognized in the Constitution and not one which the unions can decide to amend."

However, the FIOM is facing little support for its stance. The CGIL umbrella organisation to which it belongs has already understood the need to secure jobs at the plant, and its secretary Guglielmo Epifani has told Italian newspaper Corriere della Sera that he expected his members to vote for the new contract. He stated: "The workers have been laid off for a year and a half now, and will have to wait two more years for the new Panda model to enter production [at the Fiat plant in Pomigliano]… It's normal they want to get back to work at a full salary. How else would they vote?" The country's labour and welfare minister Maurizio Sacconi has also stated that "if the situation at Pomigliano ends badly, FIOM's responsibility for the failure will be enormous." Around 5,000 people have also marched in Pomigliano on Sunday (20 June) to offer their support for the new accord, while the Naples municipal and provincial government have held sessions in the town during the past day to underline their support for a deal.

Fiat Presenting Spin-Off Details to Banks

In related news, Fiat SpA is to reportedly present further details of the planned spin-off of its industrial units to banks by 30 June, as it aims to refinance 3 billion euro of debt. Dow Jones International News has been told by unnamed sources that "Talks between Fiat top executives and officials at the five banks involved started at the end of last week and will continue until the end of the month." They added that the banks included France's BNP Paribas SA and Credit Agricole SA unit Calyon; Citigroup Inc. of the United States; and Italy's Intesa Sanpaolo SpA and UniCredit Group. However, Fiat refused to comment on the news, adding that it would review the progress at a meeting on 21 July.

Outlook and Implications

Although the FIM, UILM, FISMIC and UGL unions have already agreed to the new terms that will see greater productivity from the plant around a week ago, the workers are now being given their say on the matter. While the decision made by Fiat's workers at Pomigliano d'Arco may not necessarily ensure that the automaker invests at the site, it will certainly influence the final decision. The result could go one of three ways. If the approval level is no where near the 80% levels that are required by the automaker to make the investment, it is likely to consider the risk too great given the importance of this model. As a result, production would be more likely to remain at its Tychy (Poland) site which is one of the automakers most productive, leading to the closure of the Pomigliano plant once production of the current Alfa Romeo and Fiat models produced here ends. However, given that the lack of employment opportunities in the surrounding areas for the 5,100 workers and the 15,000 indirect workers that benefit from the plant, as well as the threats that have already been made with regards a lack of commitment, this would seem to be an extremely unlikely scenario. A more likely option is an overwhelming support for the plan from many staff who have not worked consistently for almost two years, and that the investment goes ahead as planned. However, this in itself could present its own problems given the abstention of the FIOM, which could use the fact that it as a union having not signed up for the new deal to give its members the opportunity to break the covenant and take part in strike action, for example. The third scenario is one that has come to light in recent days, and would see the company creating a separate company to run the Pomigliano plant for the automaker (see Italy: 21 June 2010: Fiat Considering Creating New Company to Deal with Pomigliano Plant—Report). This would allow Fiat to annul current contracts with unions, and put in place the new deal. This is something that has already been achieved successfully at other highly unionised companies in the Italy, including the national airline Alitalia and diversified food conglomerate Parmalat.

It seems that Fiat is continuing to progress down the road towards the demerger of the company's industrial divisions, agricultural machinery business Case New Holland (CNH), truck-maker Iveco and Fiat Powertrain Technologies (FPT) Industrial and Marine. The plan is to turn them into a listed unit called Fiat Industrial, alongside its current listed unit that will comprise all its automotive-based businesses including Fiat Group Automobiles (FGA), its stake in Chrysler, Ferrari, Maserati, its component supply businesses Magneti Marelli FPT Passenger and Commercial Vehicles, and Teksid, and manufacturing installation unit Comau. The decision was taken as a result of the business returning to its feet, and now the differing earnings cycles, market volatility, capital requirements and returns on capital employed mean that a demerger would improve strategy and coherence, including the ability to unlock greater shareholder value and the ability to grow independently. However, there are still many steps to be completed such as how debt will be allocated. The presentations and the discussions are likely to be key towards keeping the timeline with schedule set for the end of the year, and the move is likely to ensure that potential investors are given a long-term view as to how the debts of the company will be distributed. Adding to the pressures on the move is the fact that Fiat has around 5 billion euro of debt maturing during the next nine months, including 3.4 billion euro in loans and 500 million euro in bonds. Any delay could result in the automaker witnessing a slide in its deadlines and could go as far as postponing the spin-off until a later date.