On Tuesday, two days after two government ministers asked Fiat to clarify its plans, the Italian government announced Prime Minister Mario Monti would meet with Fiat and Chrysler CEO Sergio Marchionne on Saturday, September 22, to talk about the company’s “strategic prospects”.

Given that the Fiat Group is the country’s biggest company, the rumors about shutting down some of its Italian plants have caused a lot of concern.

In an interview published on La Repubblica on Tuesday, Marchione refuted reports that he plans to close any factories or even move production away from Italy.

“I have never spoken of lay-offs, never proposed to close plants, never said I wanted to leave”, Marchionne told the daily newspaper.

Marchionne, however, admitted that, even though he had formerly pledged to invest €16 billion (US$) in its local operations, the group now needs to revise its investment plans due to deteriorating sales and an expected €700 million (US$) loss this year.

“Would you invest in a market overwhelmed by the crisis in which not only do you not have the certainty of making one euro of profit, but risk losing the money invested?” he asked.

UBS auto analyst Philippe Houchois does not entirely agree: “There’s a logic in cutting investment if you aren’t getting anything in return, but at some point you starve the business”, he told the Financial Times. “Not putting good capital after bad is valid but you can take it too far.”

Fiat sales in Europe nose-dived by 18 percent last month and its plants are running at less than 50 percent of their full capacity.

On the bright side, Chrysler’s 11 plants in North America are churning out all the cars they can to meet increased demand. Marchionne already plans to utilize Fiat’s assembly lines to produce Jeep models.

By Andrew Tsaousis

Story References: Financial Times

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