January 12, 2011 / 6:04 PM / in 7 years

UPDATE 1-Italian PM backs Fiat's productivity deal

* Turin factory workers to vote on Thurs, Fri

* Deal would swap labour flexibility for investment

* Shares close 0.6 pct higher, outpace autos index

(Adds background, shares, Turin meetings)

By Francesca Piscioneri

BERLIN, Jan 12 (Reuters) - Italian Prime Minister Silvio Berlusconi said on Wednesday automaker Fiat FIA.MI would have good reason to quit Italy if it failed to get unions to agree to a key productivity deal.

Workers at Fiat’s historic Mirafiori factory in Turin will vote on Thursday and Friday on the accord. It exchanges more shifts and reduced benefits for Fiat commitments to make new investments and build new models in Italy. [ID:nLDE7091KV]

Chief Executive Sergio Marchionne has said that Fiat’s future in Italy is at stake and he could move all production to lower-cost countries without an agreement.

“We think that what has been happening in this case is absolutely positive, with the possibility of an accord between the unions and the company, in the direction of greater flexibility,” Berlusconi told reporters after meeting German Chancellor Angela Merkel.

“It’s obvious that if this didn’t happen, clearly the company and business people would have a good reason to move to other countries. Let us hope this has a positive outcome,” Berlusconi said.

Marchionne is expected to win workers’ backing for the deal, which would pave the way for investment at Mirafiori worth 1 billion euros ($1.31 billion).

The accord is part of Marchionne’s wide-ranging plan to overhaul loss-making operations in Italy. It also is seen as a model for revitalising Italy’s rule-bound economy.

Representatives of several metalworkers’ unions have backed the deal but hard-line leftist union Fiom, which has just under 20 percent of workers at Mirafiori, has rejected it.

On the eve of the vote, Mirafiori foremen met workers to lay out issues in the vote. The unusual meetings drew criticism from Fiom, which said that Fiat was “taking the initiative to stand in for unions themselves”.

The Fim, Uilm, Fismic e Ugl unions, which have signed the deal, held a meeting of white-collar workers in Turin to urge its passage. City and regional labour secretaries and chambers of commerce also attended the meeting.

Fiat, which has raised its stake in U.S. automaker Chrysler to 25 percent, got a similar landmark accord at its Pomigliano plant outside Naples last year.

Shares in Fiat closed up 0.6 percent at 7.84 euros as the STOXX Europe 600 auto index .SXAP was down 0.4 percent.

(Additional reporting by Gianni Montani in Turin)

Writing by James Mackenzie and Ian Simpson in Milan; Editing by Erica Billingham

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