Stephen Pope Comments: Fiat Tests Union Strength In Shift To Worst Plant
July 16, 2010, Bloomberg BusinessWeek
Fiat SpA Chief Executive Officer Sergio Marchionne is making a 700 million-euro ($905 million) bet that he can revamp the company's least efficient factory. Escalating tension with unions may derail the strategy.
Fiat's largest union, which opposes the CEO's unprecedented proposals to curb strikes and increase shifts at the Pomigliano plant in southern Italy, is organizing a four-hour walkout today at five factories. They're protesting this week's firing of four union representatives.
The CEO angered the union when he decided July 9 to press ahead with his plan to transfer production of the Panda model, Fiat's second most popular vehicle, from Poland to its factory at Pomigliano d'Arco, near Naples. While four smaller unions at the site backed the project, more than a third of workers voted against the proposal in a June referendum, saying it violated their constitutional right to strike.
"Marchionne may need at least five years to match the output of the Polish factory", said Stephen Pope, a Cantor Fitzgerald analyst in London who has a “sell” rating on the stock. “It is a risky situation,” he said. Fiat rose as much as 14 cents, or 1.5 percent, to 9.43 euros and traded at 9.34 euros as of 10:32 a.m. in Milan. The stock has lost 8.9 percent this year, valuing the carmaker at 11 billion euros.
Failing to reach production targets could damage Fiat's operating margin, at about 2.1 percent, and tarnish Marchionne's image as a turnaround specialist, Pope said.
