Electrolux says Italian factory could shut without state aid

ROME Tue Feb 4, 2014 2:05pm EST

ROME Feb 4 (Reuters) - Electrolux's biggest plant in Italy could face closure unless a support plan is agreed with the government, the head of the Swedish appliance maker's Italian business said on Tuesday.

Under pressure from cheaper manufacturing locations in Eastern Europe, Electrolux is planning steep benefit and wage cuts for 5,000 out of the 6,200 workers it employs in Italy.

Unions have raised fears about the future of the group's washing machine plant in Porcia, northeastern Italy, where Electrolux employs 1,200 workers.

Ernesto Ferrario, chief executive of the Swedish multinational's Italian business, said there are no firm plans to close the plant but its future depends on what the government puts forward at a meeting scheduled for Feb. 17.

"We do not want to leave Italy," Ferrario said. "We want to see the exact proposal by the unions and the government and then we can give a response."

Italian Prime Minister Enrico Letta last week pledged to do everything possible to keep Electrolux in Italy, which is struggling to emerge from its longest post-war recession and where unemployment is at its highest level since the 1970s.

Investment by foreign companies, however, has long been held back by excessive bureaucracy and high labour costs.

Electrolux has proposed a sweeping package intended to cut net monthly wages by an average of 8-9 percent, rising to 15 percent over a three-year period. The company estimates the initial reduction to be about 130 euros a month for the typical worker.

Unions, however, say that the impact would be as high as 40 percent because of a reduction in the number of hours worked.

The state has been supporting Electrolux workers by paying an extra two hours' pay when they work six-hour shifts in "solidarity contracts", but this agreement expires in March. (Writing by Naomi O'Leary; Editing by David Goodman)