Fiat Group Plans to Cut 12,300 Jobs

TURIN, Italy June 26, 2003; The AP is reporting that Fiat SpA plans to slash 12,300 jobs worldwide over the next three years and close a dozen factories -- part of a turnaround plan unveiled Thursday designed to return the struggling conglomerate to profitability in 2006.

The three-year, $22.5 billion investment plan was seen as the company's last chance to remain afloat, after years of slumping sales in Italy and western Europe.

"We are in a situation of crisis as a company, but Fiat has all possibilities to get out of the crisis," said chairman Umberto Agnelli, who took over after the death earlier this year of his brother and family patriarch Giovanni.

The plan is Fiat's second in six months, and it was drafted by chief executive Giuseppe Morchio, who took the reins in March, after Fiat reported a $4.8 billion net loss last year.

The job cuts will be made at the money-losing core unit Fiat Auto, truckmaker Iveco and tractor-and-earthmoving equipment maker CNH Global. Morchio said 2,800 of the jobs will be lost in Italy, but did not list the other countries that will see job cuts.

Fiat, best known for its automobiles, also plans to hire 5,400 people, mainly in sales, research and design. Worldwide, Fiat Group now employs 178,000.

Morchio dismissed reports that top managers, including the head of Fiat Auto, would be fired in the restructuring plan.

The first step in the plan is a $2 billion recapitalization, with 368 million new shares to be issued about $5 by next month.

But the 104-year-old company -- the country's largest employer and once the pride of Italian capitalism -- is betting all of its financial and political capital on kickstarting its core units, especially Fiat Auto.

"Fiat is no longer a conglomerate of activities but a focused industrial group," Morchio said.

Fiat has pledged to sell its noncore assets. Earlier this year, it agreed to sell its Toro insurance unit.

Fiat Auto will try to boost sales by enhancing its sales network and primarily by rolling out a vast number of new models, said Morchio.

Fiat sold 20 percent of its auto unit to General Motors Corp. in 2000 and has an option to sell the rest starting in 2004.

The turnaround plan was met with caution from analysts and union leaders.

"They'll need more money, especially if the plan goes well and they want to invest more to catch the wave," said Gerardo Murano, a Fiat analyst at Analisi Dati Borsa, an independent securities firm in Turin.

Fiat reported a first-quarter net loss of $808 million, up from $766 million in the same period in 2002.