Marchionne's Italian productivity battle impacts future of Fiat-Chrysler

Fiat S.p.A. CEO Sergio Marchionne is locked in a struggle with workers in Italy that could have far-reaching consequences for his plans to make the Italian automaker and its U.S. partner, Chrysler Group, a strong global competitor.

Marchionne aims to boost Fiat's capacity utilization in Italy to 90 percent by 2014 from barely 30 percent last year.

A key part of the plan is to move production of the next-generation Panda, Europe's biggest-selling minicar, to Italy from Poland. Marchionne wants to build the new Panda in an under-used Alfa Romeo Pomigliano d'Arco plant, near Naples. But the factory has a history of labor unrest and has the lowest quality and the worst productivity of the company's five Italian plants.

Marchionne has been battling for two months with the plant's unions for a deal that wins management greater flexibility in the number and type of working shifts at the factory as well as limits on strikes and sick days.

His struggle with Pomigliano workers is important because the end result could effect the company's future labor relations throughout Italy.

In his quest for a Fiat-Chrysler that will build 6 million vehicles a year in 2014 and earn a profit margin of 6 percent, Marchionne needs a hefty boost to productivity from the company's Italian workers.

A deal at Pomigliano will give more traction to Marchionne's plan to lift Fiat car production in Italy to 1.4 million units in 2014 from 650,000 last year.

The tough-talking CEO needs efficient plants that can work 18 shifts a week when necessary. And he needs plants where workers do not go on strike when the Italian soccer team plays.

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