Fiat Threatens to Move New Alfa Romeo Production Out of Italy

Fiat SpA has frozen planned investments in at two assembly plants in Italy, citing an unfavorable labor ruling last week from the country's Constitutional Court.

CEO Sergio Marchionne tells reporters that uncertainty about Italy's labor laws could prompt it to move production of new Alfa Romeo models out of Italy. He adds that the policy doesn't affect domestic factory investments to which it has already committed.

But Fiat hasn't yet allocated funds to upgrade its factories in Cassino and Turin. The former is expected to build the next-generation Alfa Romeo Giulietta and new Chrysler 100 small sedans. The company has said the Mirafiori factory in Turin would make future Alfa and Maserati models.

Fiat aims to maintain its manufacturing presence in Italy by devoting excess capacity there to producing more upscale models and vehicles for affiliate Chrysler Group LLC to export to the U.S. Fiat said the strategy depended on lowering labor costs in Italy.

All but one of the company's Italian unions agreed in late 2011 to a new contract that traded raises and a €20 billion investment pledge for more flexible work rules and longer shifts. The dissident Fiom-CGIL union sued Fiat, contending the new pact violates workers' rights.

Marchionne insists that by upholding Fiom's argument, the court has thrown into uncertainty the company's contracts with its other unions in Italy. That, in turn, casts doubt on the lower-cost labor strategy that justifies further investment there, he adds.