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Fiat Faces Growing Calls to Come Clean On Plans for Italy

Date : 09/15/2012 @ 12:30PM
Source : Dow Jones News
Stock : Citigroup (C)
Quote : 50.535  0.475 (0.95%) @ 6:09PM
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Fiat Faces Growing Calls to Come Clean On Plans for Italy

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   By Gilles Castonguay 
 

MILAN--Fiat SpA (F.MI, FIATY) faced a political storm Saturday as two government officials joined in a growing chorus of calls for the automaker to explain whether or not it plans to follow through on an ambitious plan to spend billions of euros to revamp factories in Italy.

"It's clear that Fiat has to clarify...its commitment to the project," Industry Minister Corrado Passera told reporters.

In April 2010, Fiat Chief Executive Sergio Marchionne revealed a plan to invest 20 billion euros ($26 billion) to revamp factories in Italy and double production to more than 1.4 million units per year by 2014.

Fiat has spent about EUR1.5 billion to renovate some plants. But a year ago, the Fiat boss said that--amid the economic crisis--he was putting the plan on hold and would decide how to go forward in October 2012. Fiat reiterated its position last week, sparking an uproar among union leaders.

On Friday, the criticism took a new dimension when a prominent Italian entrepreneur, in a statement, lambasted Mr. Marchionne for the about-turn. In an unusually harsh statement, Diego Della Valle--owner of Tod's SpA (TOD.MI) fashion house and shareholder of luxury retailer Saks Inc. (SKS)--called Mr. Marchionne "inadequate" for failing to keep a commitment made to the thousands of workers and their families who depend on Italy's biggest manufacturer for their livelihood.

Mr. Della Valle didn't spare criticism of the Agnellis, Fiat's founding family, one of whose sons--John Elkann--is chairman of the car maker, which controls Chrysler Group LLC.

"[They] are making the wrong choices or, even worse, choices that are most convenient for them," he said. "Serious Italian entrepreneurs, who truly thrive on competition...who respect their own workers and are proud to be Italian, don't want in any way to be associated with people like them."

Fiat declined to comment or to make Mr. Marchionne available for comment.

A spokesman for Mr. Elkann also declined comment.

Mr. Della Valle's vitriol came amid growing anxiety about Fiat, one of the country's biggest employers, and its role in helping to create jobs and lending support to the weakening Italian economy.

"It is unrealistic to expect that a project announced two and half years ago would remain unchanged," Fiat said in its fresh statement last week, adding that it reserved the right to do whatever necessary to stay competitive.

On Saturday, Labor Minister Elsa Fornero said she was keen to meet with Mr. Marchionne to discuss the issue. Management has a responsibility "not just to shareholders but to...all stakeholders: the workers are first," she said.

After he came on the scene in 2004, Mr. Marchionne was hailed by Italians as a savior for dragging Fiat away from the brink of collapse and making it profitable again. Five years later, he was seen by analysts and investors as a genius for taking control of a bankrupt Chrysler to create a group with enough heft to compete in the world.

But the gradual shift of emphasis towards the U.S. has raised doubts among Italians about Mr. Marchionne's commitment to their country, where Fiat has gone back to losing money, hampered by too much production capacity.

He has shut factories down and put workers on furlough for extended periods.

In the U.S., where he spends half of his time overseeing Chrysler, things are doing much better, thanks to a recovering market.

Mr. Della Valle isn't a shareholder in Fiat, but he is a shareholder in other major companies in Italy--and he has in the past voiced his discontent publicly about corporate matters. He withdrew from a shareholders' pact at RCS Mediagroup SpA (RCS.MI), publisher of the leading Corriere della Sera newspaper, after a spat over corporate governance. Fiat is a shareholder of RCS.

He also criticized the way in which the board at insurance giant Assicurazioni Generali SpA (G.MI) got rid of its chief executive in June.

Mr. Della Valle has business with Fiat. His fashion house, Tod's, has a partnership with Ferrari, 90% owned by Fiat, to make a collection of shoes, wallets and other accessories bearing the prancing-horse logo of the luxury sports-car maker.

Ferrari Chairman Luca Cordero di Montezemolo, who once was chairman at Fiat and has other business ventures with Mr. Della Valle, said Friday that Mr. Della Valle's statement on Fiat was "absolutely unacceptable."

Write to Gilles Castonguay at giles.castonguay@dowjones.com.

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