January 29th, 2009
02:14 PM GMT
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ROME, Italy - There is a saying in this country that what is good for automaker Fiat is good for Italy, meaning that if the government can save Fiat, it will save hundreds of thousands of jobs. The problem is, who can save the Italian government?

Fiat worker Luigi Mercogliano said the government needed to inject more money to re-launch the industry.
Fiat worker Luigi Mercogliano said the government needed to inject more money to re-launch the industry.

Fiat is the top private employer in Italy, producing more than 10percent of the country's GDP. It has a domestic workforce of roughly 78,000 but hundreds of thousands of people including spare parts suppliers and sales and after-sales service providers owe their jobs to the carmaker.

The head of Italy's business association estimated that the entire auto industry here has a workforce of 1 million.

This is why when there is talk about bailing out Fiat, in reality the government needs to include a vast number of businesses that go beyond the car giant itself.

Unfortunately the cash-strapped Italian government can't afford the billions of dollars other European nations are pumping into their economies to revive the automotive sector.

Fiat's chief executive was recently quoted warning that 60,000 jobs in the automotive sector could be lost if the government did nothing to help. Fiat has already enforced temporary production halts at its Italian plants, sending thousands of workers home on reduced pay.

After a series of top-level talks between government officials, trade union representatives and auto bosses, the minister for economic development promised to unveil "within the next 10 days" a series of measures to help the sector.

The new measures pale if compared to the billions of dollars that are being promised to automakers in the U.S. and elsewhere in Europe. All the Italian government can afford at this time, according to people familiar with the plan, is roughly $650 million aimed mainly at promoting the sale of new car models with a low environmental impact.

For example, if you own a car that is at least 10 years old, and you plan to trade it in for a new and less polluting model, the government would give you roughly $2,000 to purchase it (a similar plan is already in place, but covers up to $1,000).

Government officials say companies researching new eco-friendly technology would also receive financial assistance.

There are also talks about increasing road taxes for the largest and more polluting models, such as sports cars and SUVs.

The plan, which is still under discussion, sparked protests among Fiat autoworkers, especially those who have been sent home with reduced pay.

"We don't spit on the government's good intentions," said Luigi Mercogliano, who has worked just one week since September at the Fiat plant near Naples. He and a few hundred were demonstrating outside the prime minister's office on Wednesday night while the talks were under way. "But the money they are talking about is not sufficient to re-launch the automotive sector in Italy," he added. "In other countries, in Germany, in France and in the U.S., their governments are already putting in a lot more money for the technological renewal and the development."

The Italian government knows what needs to be done. But it doesn't have the money to implement a large-scale investment plan. So, while it can't simply sit on the sidelines and watch other European partners pumping money into their car industry, it is trying to avoid having to deal later with the problem of massive layoffs.

Fiat's top managers say the situation is difficult, and called for quick and decisive measures. But the government appears reluctant to intervene massively to assist the car industry knowing that other sectors are asking for similar treatment.

Indeed representatives of construction and infrastructure businesses are not sitting on the sidelines watching the government bail out the car industry. They warn that some 250,000 jobs are at risk over the next six months, and are asking for billions of dollars in aid.

Italy's GDP is in freefall (like that of many other EU countries), but the problem here is that its current debt is greater than the total value of its economy (roughly 104 percent of its GDP). The outlook is bleak.

So, while construction workers, automakers, fishermen, farmers, parmesan producers and their extended families are asking for bail out money, my question is: who will bail out the Italian government?

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soundoff (5 Responses)
  1. dan in Tucson

    Bailouts are just plan and simple, a bad idea. Applying a quick fix bandaid on a financial problem never works out. It just gets you deeper in the hole. The reason a company gets in trouble in the first place is greed, poor management, and lack of foresight. So what makes us think that thowing money st them will improve that situation? If business were forced to restructure or close down, our financial recovery would be much quicker. Yes it would be painfull at first, but we would immerge stronger and better than ever. Bailout has become the new buzzword for the decade. I feel sorry for our children for they are the ones who will suffer for our selfishness.

    January 29, 2009 at 2:27 pm |
  2. Lauro Silva - Brazil

    Alessio,
    sei certo! L´Italia ha l´acqua alla gola.-you´re right. Italy is in a difficult situation. Italy, Portugal, Spain and Greece are in a more serious mess currently, because besides the present crisis itself, these countries have to the fore another problem, that is, a currency problem. Euro is a too high value currency for them, what has been making their situation more difficult inside and outside EU. These countries need money now to face the crisis,and where to get this money from? What interest rate do they have to pay in case they find a source? How to continue inside the EU? How to keep going with euro? Even without the current mess the currency problem for Italy had been already forecast years ago. And now? What has to be done? Bailing out Fiat does not solve the problem and the others, how to bail out them? Vanno anche alla deriva. The situation is the same for them. Then, what is prudent to do is to save the bailout money, cut taxes and huge salaries keeping in mind that laidoff workforce deserves to be helped indeed. As to the companies they will get hold of a way to pull them up by their own bootstraps.

    January 29, 2009 at 4:06 pm |
  3. Lauro Silva - Brazil

    We expect tha Italy does not start bailing out the banks, the bigger real creators of the global crisis elsewhere the world. They get the bail out, keep the money to make their own profits,  squeeze  easy credits and more than anything,end up laying off the clerks. Any government should use bail outs money to help who indeed need to be helped, the laid-off working people, and besides, create a massive amount of  new jobs constructing and remodelling public buildings, hospitals, roads, bridges,etc. Small companies should have their opening encouraged and facilitated to give job to jobless, taking into account that´´  piccola barca non ha bisogno di molto vento´´- any wind gets small boat moving on.

    January 29, 2009 at 5:44 pm |
  4. E Baggen

    As the Italian government is riddled with bad apples, the Italian population is surprisingly low indebted and there still is some money around. Here you will not find houses mortgaged for 120% like in Holland but many with a great deal of equity or fully owned. Time will tell but even when the Italian government goes bankrupt (and frankly, I think they don't give a hoot) the Italians themselves will continue eating.

    January 31, 2009 at 9:26 am |
  5. Giovanni Franceschini

    ps...after reading today what the current administration has in mind for telecom italia, that is, to basically destroy it, a private company, by forcing it to discorporate it's large-bandwith infrastructure and creating a(nother) public holding company to control it, thereby allowing free access to the large bandwith information transferal, thereby allowing Mediaset it's bizillionth free ride and ensuring the contuation of it's 25-year globally anamolous broadcast monopoly, I'm afraid my terrible thought has only become, er, terribl-er.
    Since it appears that all or nearly all auto makers are receiving or going to receive public help, so should Fiat. If it does not, it is only because it does not -as yet – belong to Italy's prime minister or one of his allies.
    Italy needs to allow competitent people express themselves, assume determinate jobs, influence it's economy, maybe even make the undeservid already wealthy pay taxes. I mean, any taxes, which they now don't pay. And maybe even make Mediaset pay for at least the right to broadcast on publically ownes frequencies, which they in effect now do not. One year of a normal rent (leasing rights) paid by Mediaset would already pay for the auto bailout.
    I'm sure that will happen soon.

    January 31, 2009 at 12:37 pm |

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