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Tuesday, 15 October, 2002, 11:21 GMT 12:21 UK
Fiat rescue plan comes under scrutiny
Protesting Fiat worker
Fiat workers fear for the future
Italy's struggling industrial giant, Fiat, will reportedly hold a meeting with its creditor banks this week to seek backing for its restructuring plans.


Italy cannot be left without industry

Romano Prodi
Earlier this month, Fiat set out plans to cut about 8,000 jobs at its Fiat Auto car making operations to curb widening losses, flagging sales and high debts.

Fiat is Italy's biggest private sector employer and the government is thought to be particularly keen to salvage 1,800 jobs at Fiat's factory in Sicily, a region with 20% unemployment.

Government hopes of winning European Union approval for aid to Fiat have been given a shot in the arm from European Commission president Romano Prodi, who called it "an extraordinarily precious manufacturing resource" that could not be allowed to disappear.

State rescue talks

"Italy cannot be left without industry," Mr Prodi said in an interview with La Stampa newspaper.

Fiat's creditors will meet the Italian government this week, Reuters news agency reported, citing financial industry sources.

The government is reportedly considering taking a stake in Fiat Auto, the car making arm of the giant Fiat Group.

Under this plan, the government could inject funds into Fiat Auto to protect jobs.

However, the government is blocked from giving state aid to Fiat without approval from the European Union (EU) by laws on fair competition among member states.

Mixed signals

EU Competition Commissioner Mario Monti has said that he reminded Italian prime minister Silvio Berlusconi of this when the Italian leader called him "to outline potential initiatives" over the weekend.

However, Mr Prodi, who is a former prime minister of Italy ,has described Fiat as an "extraordinarily precious manufacturing resource which was built up over decades".

"Everything must be done to make sure it does not disappear," Mr Prodi said.

"There are instruments that need to be thought about but the objective should not be lost from sight."

Italy's economy ministry has denied press reports that it is considering mounting a rescue of Fiat via Finmeccanica, an industrial conglomerate in which the state has a 32% stake.

"The hypothesis of Finmeccanica's involvement in Fiat's industrial and financial plan is wholly without foundation," the ministry said.

Another option would be for state development agency Sviluppo Italia to take a role in Fiat's restructuring and a stake in the car marker.

The head of Sviluppo Italia, Massimo Caputi, has said this would not break European rules, the Financial Times reported.

Economic impact

Analysts estimate the lay-offs at Fiat Auto would save the firm about 250m euros ($246m; 158m) a year.

Thousands of secondary jobs dependent on the Fiat factories would also be threatened.

Trade unions have held work stoppages, blocking railways and motorways to protest against the job cuts.

Italy's industry minister has already hinted that Fiat's layoffs may trigger a revision of Italy's 2.3% growth target for next year.


Cars and strategies

Background
See also:

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