U.S., Serbia could benefit if Fiat shifts production from Italy

TURIN -- Fiat-Chrysler factories in the United States and Serbia could benefit if CEO Sergio Marchionne carries out a threat to move production of new Fiat, Alfa Romeo and Jeep models outside of Italy unless the carmaker gets clear labor rules in Fiat's home market.

Marchionne said on Tuesday that Fiat will put new investments in Italy on hold until it gets a clearer idea of the impact of a court ruling that threatens his attempts to introduce more flexible work conditions at the automaker's Italian factories.

Marchionne's threat may just be a negotiating tactic to pressure the hardline Fiom metal workers union to accept Fiat's new labor contract.

But if he decides to restructure its production, these models could be shifted from Italy, according to sources:

• Alfa Guilia. The mid-sized car could be built in a Chrysler factory in the U.S. The Giulia is due to go into production in 2015 at Cassino in Italy for sales in Europe, China and the United States. Alfa plans annual production of 100,000 sedan and wagon variants of the Guilia. The car would become Alfa's biggest seller, accounting for a third of the brand's total volume.
• Maserati Levante. The SUV is scheduled for production at Fiat's Miafiori plant in Turin, although there has been no official confirmation of this. The Levente will be a sibling to the Jeep Grand Cherokee and could be built at Chrysler's Jefferson North plant in Detroit.
• Jeep B-SUV and Fiat 500. Fiat said last December that it would invest more than 1 billion euros ($1.3 billion) to add these small SUVs to its plant in Melfi, central Italy, but the two vehicles could also be built at Fiat's new factory in Serbia, which produces the 500L and has room to add more capacity. Production is scheduled to start in June 2014 with the as-yet-unnamed Jeep variant coming first, followed three months later by the Fiat 500X. The planned annual volume for the Jeep is up to 150,000 units while Fiat's version will account for 130,000, sources said.

Fiat has been rolling out investments at its Italian factories in exchange for concessions from labor unions for more flexible work conditions.

The metalworkers' union Fiom did not support Fiat's new labor contract, which includes longer shifts and shorter breaks, and it started legal proceedings against Fiat. The proceedings led to a ruling from Italy's constitutional court last week that a clause in the country's labor law from the 1970s allowing automaker Fiat to bar the Fiom from representing workers on its factory floor violated the constitution.

Marchionne has asked the government to propose a solution for the uncertainty created by the court ruling. He said Fiat "needs clear and reliable rules" before investing in more projects in Italy. "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.

Alfa, Maserati crucial

Alfa and Maserati are critical to Fiat's effort to end losses in Europe by 2016. The company plans to invest more than 2 billion euros ($2.56 billion) on the brands to develop eight Alfa models and six Maseratis. Those models were targeted for production in Italy to fill under-used factories.

Fiat will roll out the Ferrari-powered Maserati Ghibli and start deliveries of the new Alfa Romeo 4C sports car this year to boost exports of upscale cars outside Italy after European losses widened to more than 700 million euros in 2012. Its plans with Alfa Romeo and Maserati target the dominance of BMW, Audi and Mercedes-Benz in the luxury-car segment.

Marchionne said on Tuesday: "The relaunch of Alfa Romeo will continue for sure. Italy should decide if they want it to happen in this environment or not as Fiat and Chrysler have several alternatives."

The 4C and Ghibli are already in pre-production so will not be affected by any restructuring. A rear-drive, two-seat roadster known as the Spider, will also be unaffected. The car is being co-developed with Mazda, which will produce the Alfa model alongside its MX-5 in Japan.

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 will not be revised.

Bloomberg and Reuters contributed to this story