Italian PM presses Electrolux to keep plants open

Thu Jan 30, 2014 2:25pm EST

* Swedish appliance maker planning steep cuts to labour costs

* Unions call on government to act as questions raised over plant future

* Electrolux latest in series of foreign employers to see problems in Italy

By Francesca Piscioneri

ROME, Jan 30 (Reuters) - Prime Minister Enrico Letta pledged on Thursday to do everything possible to ensure Electrolux maintained production in Italy following uncertainty over the future of the Swedish appliance maker's local plants.

Electrolux AB, facing growing cost pressure from cheaper locations in eastern Europe, is planning steep cuts to wages and benefits for its 5,700 workers in Italy and unions fear it may also close a washing machine plant in Porcia, employing 1,200.

The company has not made full details of its plans public or confirmed plans to close the plant. It says the cuts, made up of a mixture of reductions to working hours and benefits, would amount to around 8 percent or some 130 euros ($180) a month for a typical worker but unions say the impact would be more severe.

The UILM union estimates that a typical worker with a gross salary of under 2,000 euros would be 18 percent worse off.

Electrolux managers have held a series of meetings with unions and government officials to discuss their plans for reorganising production, with another meeting between all three groups scheduled for Feb. 17.

But Industry Minister Flavio Zanonato said this week the plans were "not convincing" and concern remained over the future of the plant in Porcia, north of Venice, the largest of four sites in northern Italy.

Concerned at the prospect of losing one more foreign industrial employer while unemployment is at its highest level since at least the 1970s, the government has vowed to help find a solution.

"We will not raise the white flag. This type of production must continue in Italy," Letta told a conference of European industry ministers in Rome. He said he would do "everything to convince the company."

However its scope to intervene is limited by efforts to rein in the deficit and cut public debt, the highest in the euro zone after Greece.

"INDUSTRIAL DESERT"

The struggle over Electrolux underlines to dire state of the electrical appliances sector in Italy, once a major producer of white goods which has seen its output cut in half since 2006 under mounting pressure from lower cost locations.

The head of Italy's main business association Confindustria wrote to Letta calling for urgent action to address problems ranging from the high cost of labour and taxes to a rigid labour market which the Electrolux case highlighted.

"Without a turnaround in this trend we will be heading inevitably towards an industrial desert in our country and Confidustria cannot accept this idea," Confindustria President Giorgio Squinzi wrote.

Italy is still struggling to emerge from its longest postwar recession and although the government is expecting a return to growth in the last quarter of the year, the immediate impact on unemployment is expected to be slight.

The most recent data showed headline unemployment running at 12.7 percent, the highest level since current records began 37 years ago, while the youth unemployment rate was running at more than 41 percent.

The battle over Electrolux coincides with new centre-left leader Matteo Renzi preparing to unveil a new Jobs Act intended to simplify the complex system of employment contracts widely blamed for deterring Italian employers from hiring new staff.

As well as burdensome and complicated bureaucracy, companies have long complained of excessive costs in Italy, which has some of the highest corporate taxes in the world.

Figures last year from the Organisation for Economic Cooperation and Development showed the tax wedge in Italy - the difference between what its costs a company to employ a worker and the worker's take home pay - at 47.6 percent against an average for the rest of the 34-member bloc of 35.6 percent. ($1 = 0.7373 euros) (Writing by James Mackenzie, editing by David Evans)

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