Italian premier suggests end for auto incentives program in stand-off with Fiat over jobs

Berlusconi casts doubt on cash-for-clunkers future

ROME — Premier Silvio Berlusconi on Thursday cast doubt on the future of Italy’s cash-for-clunkers scheme, as the government squares off with automaker Fiat over the company’s plan to shut down a major factory.

The incentives program has become a sort of bargaining chip as the government and unions press Fiat about its intentions to cease auto production at its Sicilian plant in 2011.

Berlusconi said Fiat does not appear interested in cash-for-clunkers incentives after CEO Sergio Marchionne said in an Italian newspaper interview that continuing the program was not essential to the automaker’s bottom line — but clarity is.

Berlusconi told a weekly news conference that the government is ready “to give a hand” to the sector with new incentives despite Marchionne’s comments. He said the issue remained under discussion.

Some officials have suggested the incentives should be tied to the maintenance of employment levels in Italy, and the parliament on Thursday summoned Marchionne to discuss the future of the Termini Imerese in Sicily.

Marchionne said in comments later Thursday that a “possible government decision not to renew them (the incentives) finds us perfectly in agreement.”

He maintained that “Fiat is capable of handling the situation, from both an economic and industrial point of view, even in the most pessimistic scenario.” Instead, he called for “a strong and serious industrial policy that aims at the competitive strengthening of the auto industry,” a sector seen as crucial around the world, he said.

The comments were released in a statement after Marchionne had given a lengthy, two-page interview focusing on Italian labor and production issues to the La Stampa daily, which is owned by the same shareholding family that controls Fiat.

In the interview, he said Fiat would accept any government decision on the incentives “without drama.”

“But we need to have a decision in the near-term to remove uncertainty and then we will be able to manage the market and the situation, whatever it is,” he told La Stampa.

Marchionne has in the past said he thinks it is the wrong time for governments to cut off incentives as the industry continues its recovery from a disastrous falloff in sales, but calculations for full-year forecasts presented last week to analysts also foresaw the Italian automaker achieving earnings in 2010 even if the programs are discontinued.

In two other markets important to Fiat, German has ended its program, while France is continuing them on a more limited basis.

Marchionne said that the decision to close Termini Imerese “has been made, but we are ready to do our part, take on the responsibility, along with the government, of the social costs of this decision.”

“We cannot permit ourselves to keep open a plant that has been functioning at a loss for too many years,” Marchionne said, adding that removing a loss-making operation would help sustain the manufacturing base in Italy. Logistics costs add up to euro1,000 ($1,400) to every car coming off the Sicilian line.

In a country where rhetoric often dominates public debates, Marchionne sought to set the record straight on Fiat’s commitments. He noted that Termini Imerese was established 40 years ago, when Fiat enjoyed a monopoly in the Italian market — but that was no longer the case. He also denied critics’ accusations that Fiat had taken as much as euro1 billion to run the Sicilian factory. Marchionne said Fiat invested euro552 million in the plant in 1969 and received financing of euro164 million, which it repaid.

He also said that Fiat was not sending a political message with its decision to halt auto production for two weeks later this month due to falling orders.

“This is not a provocation or blackmail,” he said. The decision was made after the numbers showed orders in January had plummeted 50 percent from a month earlier and 10 percent below a year earlier “when the market was in full crisis,” he said.