UPDATE 2-Fiat Poland to slash workforce as slack demand bites

Fri Dec 7, 2012 3:23pm EST

* Cites falling demand for cars across Europe

* Starts negotiations with unions

By Maciej Onoszko and Jennifer Clark

WARSAW, Dec 7 (Reuters) - Fiat Auto Poland, plans to cut one third of its workforce in Poland, where it makes its popular Fiat 500 minicar, as a sales slump that has forced automakers to shut plants in Western Europe hits one of Fiat's most productive factories.

Excess production capacity is piling pressure on carmakers' profitability as sales stagnate. Fiat has already sent most of its Italian labor force home on a temporary layoff for most of the fall and in some cases well into January.

Ford's recent decision to close three factories and cut 5,700 jobs in Europe does not herald more severe downsizing at General Motors' Opel unit, which has already made big cutbacks, Opel's top labor leader said last month.

Europe's deteriorating economic conditions have weighed particularly on mass-market carmakers, though premium brands are also showing they are not immune - especially with China's once-torrid pace slowing.

Mass-market manufacturers Ford, Opel, Peugeot and Fiat all expect heavy losses in Europe over the next couple of years as painful economic reforms send demand plummeting to levels not seen in nearly 20 years.

Now it's Poland's turn to feel the pinch. The job cuts will hit Fiat's Tychy plant, where the one-millionth Fiat 500 recently rolled off the assembly line. The car has been produced since 2007 and is also made in Toluca, Mexico.

Fiat's announcement comes as Poland's economy, which was relatively unscathed in the global economic crisis, has started to slow sharply.

Growth slowed to 1.4 percent in the third quarter, and the unemployment rate is estimated to have risen to 12.9 percent at the end of November, from 12.5 percent in the prior month.

Fiat's output in Poland will be below 350,000 cars this year and will drop below 300,000 in 2013, less than half its 2009 total, the company said on Friday. Fiat makes cars there for export, including to Italy, its main market, where car sales fell 20 percent in November from a year ago.

Fiat, Poland's largest car manufacturer, plans to cut around 1,500 jobs. The exact number of workers losing their jobs will depend on negotiations with trade unions that started on Friday and are due to finish by mid-January, a spokesman for Fiat Auto Poland said.

The plant, located in Tychy, in the south of Poland, employed 4,967 workers at the end of October, and is one of Fiat's most productive. It operates under Fiat's World Class Manufacturing program, an efficiency and cost-control system that has been rolled out across Chrysler plants since Fiat's 2009 takeover of the U.S. automaker.

Work at the factory was already stopped for a week in November. From 2013, Tychy will no longer make the old version of the best-selling Fiat Panda.

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