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Italy on tenterhooks ahead of talks with crisis-hit Fiat

Amelie Herenstein
The head of Italian carmaker Fiat, Sergio Marchionne, pictured during a press conference in Turin, in April. Italians are waiting with bated breath for talks between Prime Minister Mario Monti and Marchionne on the future of a troubled auto giant that once symbolised Italy's boom.

Italians waited with bated breath on Saturday for talks between Prime Minister Mario Monti and Fiat boss Sergio Marchionne on the future of a troubled auto giant that once symbolised Italy's boom.

Marchionne has repeatedly warned he may be forced to shut down one of Fiat's five massive Italian plants, which are all producing way below capacity because of a slump in European car sales that has hit Italy particularly hard.

The subject is an emotive one in Italy -- where Fiat is the biggest employer in the private sector and the company's 113-year history is closely bound up with the ups and downs of the Italian economy and the trade union movement.

Marchionne laid out his cards on Friday, saying he hoped the Italian government had taken note that Fiat's recent successes in Brazil had been helped by "financing and tax breaks" given to auto sector investors there.

Fiat's Brazilian plant in Pernambuco, he said, had received "up to 85 percent financing on a total investment of 2.3 billion euros ($3.0 billion)."

"We know very well that, considering the current European rules, similar financing conditions are impossible within the European Union," he added.

"Fiat's last operation of this kind in Italy was in the early 1990s."

A report in La Repubblica daily said Fiat could unveil a programme of early retirements and reduced hours and a plan to allow production at its Italian plants by other auto companies to stave off outright factory closures.

The most recent controversy over Fiat was unleashed when the company last week said it was dropping a strategic plan it had announced in 2010 to invest 20 billion euros and produce 1.4 million cars in Italy by 2014.

Fiat said it could no longer meet the targets because the economic crisis has brought car sales in Italy back down to their level 40 years ago.

Marchionne said this week that he wanted Fiat to have a presence in Italy but gave few details on the future of the company's plants.

Trade unions have been clamouring for the government to step in.

The controversy comes at a particularly tough time for Monti who is already in sensitive negotiations with trade unions as unemployment increases and the end of a punishing recession is still not visible on the horizon.

Marchionne, who is also the chief executive of Chrysler which Fiat is now merging with, is a hugely divisive figure in Italy.

Supporters laud his managerial quality but his many critics accuse him of "ingratitude" towards Italy and a high-handed attitude.

"Fiat is about to announce to closure of its Italian plants and a departure from this country... after more than a century of history," Curzio Maltese, a columnist for the La Repubblica daily, wrote on Friday.

"This is the final act," he said, claiming that Marchionne "could not wait for a chance to cut the last ties with his homeland."

"This means that in the eyes of the whole world, Italy is no longer a place to invest," he said.

A report in Il Sole 24 Ore business daily even said the future headquarters of the merged Fiat-Chrysler group may not be in Italy.