MILAN Fiat FIA.MI has pledged 1 billion euros of investment at its hometown Mirafiori plant in northern Italy, a union leader said, as it pushes forward with plans to boost sales of its luxury model line-up and bring its loss-making European business back to profit.
The move is a turning point for some 5,500 laid-off workers in Turin, who have waited for three years for promised spending at the plant, and signals the carmaker's commitment to continue manufacturing in Italy.
"We're very happy with this decision," said Flavia Aiello, UILM union representative at Mirafiori, whose office is a stone's throw from the gates of the mammoth plant. "We had some very strong worries about the future of the plant."
Unions had grown increasingly concerned that Fiat might delay investment as mass-market carmakers in Europe struggle through the sixth year of a contracting market.
But Fiat, which has promised to eliminate losses in Europe by 2016, risks being left behind if it does not have new models to sell into what ratings agency Moody's expects to be a recovering European market from 2014.
The Mirafiori move also represents a reversal of Fiat's previous determination to link the resumption of investment to clarification of Italian labor laws, indicating that a long-running dispute with Italy's Cgil union is winding down.
"We can't wait any longer, and neither can you," Fiat Chief Executive Sergio Marchionne wrote in letter to Mirafiori employees.
Marchionne made a surprise appearance on Wednesday at a meeting with unions in Rome.
A union leader who was at the meeting with Marchionne said Fiat had agreed to invest just under one billion euros by the end of next year at Mirafiori to begin producing a Maserati sports utility vehicle, or SUV, in 2014.
A company spokesman said more details would be provided later in the month.
The fate of Mirafiori has been closely watched by unions and politicians worried that Fiat, whose five Italian car factories run at well under total capacity, could shift production to the United States.
Mirafiori, one of Europe's largest factories with a capacity to build around 300,000 units per year, has been running for only about three days a month since April 2012. It built just 62,594 cars in 2011.
Fiat said on Wednesday it would seek an extension of the lay-off scheme at Mirafiori because it needs more time to install new equipment, beginning in the coming weeks.
The Maserati SUV will be sold from 2015, part of Fiat's plan to boost Maserati's sales to 50,000 in 2015 from just over 6,000 cars in 2012. Maserati's first two new models, the Quattroporte and the Ghibli, have been well received. IDnL6N0GT2HU
The Maserati SUV model will not be enough to maximize the 2 million square meter plant's capacity, analysts said on Wednesday.
According to minutes from the meeting, Marchionne, who is also head of Chrysler, confirmed the group would press ahead with promised investments at the Cassino factory, where new Alfa Romeos are expected to be built.
(Reporting by Stephen Jewkes, Jennifer Clark and Alberto Sisto; Editing by David Cowell)