US embassy cable - 02ROME5750

UNCLAS SECTION 01 OF 02 ROME 005750 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EUR/WE AND DRL/IL 
DOL FOR ILAB/BRUMFIELD, LEVINTOW 
 
E.O. 12958: N/A 
TAGS: ELAB, ECON, PGOV, SOCI, ECON, PGOV, SOCI, IT, ITELAB 
SUBJECT: FIAT: WORKER PROTESTS CONTINUE; SICILIAN SOLUTION 
IN SIGHT? 
                       UNCLASSIFIED 
 
 
PAGE 02        ROME  05750  01 OF 02  271251Z 
 
REFTELS: A) ROME 5139   B) MILAN 723 
 
SENSITIVE -- NOT FOR INTERNET DISTRIBUTION. 
 
1. (SBU) SUMMARY: FIAT AUTO, TRADE UNIONS AND THE BERLUSCONI 
GOVERNMENT CONTINUE THEIR POSTURING AROUND THE AUTOMAKER'S 
PLAN TO CUT COSTS BY IDLING THREE PLANTS AND LAYING OFF OVER 
8,000 EMPLOYEES.  ALTHOUGH FIAT'S LENDERS APPEAR TO BE THE 
ONLY ONES CONTENT WITH THE PLAN AS CONCEIVED, WORKER 
ACTIVISM, POPULAR ATTENTION -- AND GOVERNMENT MEDIATION -- 
IS FOCUSED ON SICILY, WHERE CHRONICALLY HIGH UNEMPLOYMENT 
AND THE SPECTRE OF A RESURGENT MAFIA MAGNIFY THE SOCIAL 
IMPACT OF 1800 LAYOFFS AT FIAT'S TERMINI IMERESE PLANT. 
WITH THE ENTIRE SICILIAN PARLIAMENTARY DELEGATION HAILING 
FROM THE PARTIES IN PM BERLUSCONI'S COALITION, THE 
GOVERNMENT IS DETERMINED TO PREVENT THE PLANT'S PERMANENT 
CLOSURE.  AT ITS HEART, THE WRANGLING IS NOT ABOUT THE 
RESTRUCTURING PLAN'S IMMEDIATE IMPACT; IT'S ABOUT COMPETING 
VISIONS FOR THE LONG-TERM HEALTH AND DIVERSITY OF THE 
ITALIAN ECONOMY.  FOR MANY ITALIANS, THE FIAT CRISIS HAS 
BECOME A LEITMOTIF FOR THE FUTURE SHAPE OF THEIR INDUSTRIAL 
SECTOR AND LABOR MARKET -- AND WHAT ONE SEES DEPENDS VERY 
MUCH ON WHICH END OF THE PENINSULA ONE LIVES.  END SUMMARY 
 
2. (U) SOME OBSERVERS (INCLUDING US) HAVE LIKENED THE 
MANEUVERING AROUND THE RESTRUCTURING PLAN TO A HIGH-STAKES 
POKER GAME.  BUT IN RECENT WEEKS, IT'S LOOKED MUCH MORE LIKE 
A GAME OF CHICKEN, WITH EACH PARTY SPEEDING TOWARD THE 
OTHERS, ACCELERATOR JAMMED TO THE FLOOR, HOPING TO FORCE THE 
OTHER PARTIES OFF THE ROAD.  THE GOVERNMENT AVERTED A MAJOR 
                       UNCLASSIFIED 
 
PAGE 03        ROME  05750  01 OF 02  271251Z 
COLLISION AT A NOVEMBER 25 "MEDIATION" SESSION (TO WHICH IT 
HAD CONVOKED THE PARTIES) BY PERSUADING FIAT TO POSTPONE ITS 
PLANNED LAYOFF OF 7600 WORKERS FOR 10 DAYS.  THE 
POSTPONEMENT, DEMANDED BY LABOR AS A PRECONDITION FOR 
FURTHER TALKS, SETS THE STAGE FOR FURTHER DISCUSSIONS OF A 
MODIFIED FIAT RESTRUCTURING PLAN. 
 
3. (SBU) ALTHOUGH THE ENTIRE PLAN OSTENSIBLY WILL BE UNDER 
REVIEW, IT'S CLEAR THE GOVERNMENT'S MAIN OBJECTIVE WILL BE 
TO HAMMER OUT AN AGREEMENT THAT PRESERVES MOST, IF NOT ALL, 
THE 1800 JOBS AT FIAT'S PLANT IN SICILY.  BEHIND THE SCENES, 
EVEN LABOR SEEMS TO AGREE WITH THIS APPROACH; UNION 
OFFICIALS IN MILAN HAVE TOLD US THEY EXPECT MOST OF THE 
WORKERS IDLED FROM AN ALFA ROMEO PLANT NEARBY TO QUICKLY 
FIND OTHER JOBS IF, AS EXPECTED, THE PLANT IS PERMANENTLY 
CLOSED.  AT THE NOVEMBER 25 SESSION, FIAT OFFICERS 
REPORTEDLY PROPOSED MODIFICATIONS UNDER WHICH THE SICILIAN 
PLANT, SITE OF THE MOST DRAMATIC PROTESTS, WOULD REOPEN IN 
SIX MONTHS AFTER RETOOLING TO PRODUCE A NEW VERSION OF THE 
PUNTO -- PRODUCTION THAT WOULD BE SHIFTED FROM FIAT'S 
MIRAFIORI PLANT IN TURIN. 
 
4. (U) IN THIS AND FUTURE PASSES OF CHICKEN, EACH OF THE 
DRIVERS HAS SOME HEAVY MUSCLE RIDING SHOTGUN.  THE UNION 
CONFEDERATION LEADERS CAN POINT TO THE THOUSANDS OF FIAT 
WORKERS, THEIR FAMILIES AND OTHER SUPPORTERS WHO HAVE STAGED 
A ROLLING SERIES OF STRIKES AND OTHER ACTIONS TO DRAMATIZE 
THE IMPACT OF THE LAYOFFS.  THOUSANDS OF FIAT WORKERS AND 
THEIR FAMILIES NOVEMBER 12-15 BLOCKED PALERMO'S AIRPORT AND 
TRAIN STATION, THE MESSINA FERRY TERMINALS AND SICILIAN 
HIGHWAYS, SNARLING TRAFFIC, PROMPTING WIDESPREAD DELAYS AND 
                       UNCLASSIFIED 
 
PAGE 04        ROME  05750  01 OF 02  271251Z 
BRINGING MUCH OF THE REGION/ISLAND TO A STANDSTILL.  WORKERS 
FROM THE ALFA ROMEO PLANT OUTSIDE MILAN SHUT DOWN MALPENSA 
AIRPORT FOR AN HOUR NOVEMBER 21 AND BLOCKED A MAJOR FREEWAY 
NOVEMBER 25.  STRIKES HAVE IDLED ALL OF FIAT'S PLANTS 
SEVERAL TIMES. OBSERVERS POINT TO THE DIFFERENT ATMOSPHERE 
AT THE VARIOUS FIAT PLANTS AFFECTED: AT THE ALFA PLANT 
OUTSIDE MILAN AND AT FIAT'S HEADQUARTERS IN TURIN, THE MOOD 
IS ONE OF ANGER; AT THE SICILIAN PLANT, IT IS ONE OF 
DESPERATION.  METALWORKERS HAVE STAGED A SECTOR-WIDE 
SOLIDARITY ACTION, AND ONE OF THE METALWORKER FEDERATION 
LEADERS TOLD US TALKS WERE UNDERWAY TO ORGANIZE A SOLIDARITY 
STRIKE AT FIAT'S OTHER EUROPEAN PLANTS. 
 
5. (U) ON MANAGEMENT'S SIDE, FIAT AUTO'S LENDORS AREN'T JUST 
ALONG FOR THE RIDE; THEY'VE LEANED ACROSS AND ADDED THEIR 
FOOT TO THE ACCELERATOR.  UNINTERESTED IN EITHER PROVIDING 
FURTHER LOANS OR BECOMING FIAT SHAREHOLDERS BY BUYING BACK 
THEIR DEBT, THE BANKS CONTINUE TO PRESS FOR MAXIMUM COST 
SAVINGS. THE COMPANY HAD A MUCH-PUBLICIZED MEETING WITH ITS 
MAJOR LENDORS NOVEMBER 21.  AFTERWARD, IT DECLARED THAT IT 
WAS WILLING TO ADJUST THE DETAILS OF ITS RESTRUCTURING 
PROPOSAL BUT COULD NOT ACCEPT ANY CHANGES THAT REDUCED THE 
PROJECTED COST SAVINGS (AT LEAST 2 BILLION EUROS). 
 
6. (U) THE BERLUSCONI GOVERNMENT'S CAR IS ALSO CROWDED, 
JAMMED AS IT IS WITH THE ENTIRE SICILIAN PARLIAMENTARY 
DELEGATION (NOT TO MENTION SEVERAL OF THE CABINET'S MOST 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ7268 
 
PAGE 01        ROME  05750  02 OF 02  271251Z 
ACTION EUR-00 
 
INFO  LOG-00   NP-00    AGRE-00  AID-00   CEA-01   CIAE-00  COME-00 
      CTME-00  DODE-00  ITCE-00  DOTE-00  ANHR-00  SRPP-00  DS-00 
      EB-00    ED-01    EXME-00  E-00     FAAE-00  UTED-00  VC-00 
      FRB-00   HHS-01   H-01     SSA-01   TEDE-00  INR-00   ITC-01 
      LAB-01   L-00     VCE-00   AC-01    DCP-01   NSAE-00  NSCE-00 
      OMB-01   OPIC-01  PA-00    PER-00   PM-00    PRS-00   ACE-00 
      P-00     SCT-00   SP-00    IRM-00   SSO-00   STR-00   TEST-00 
      TRSE-00  USIE-00  PMB-00   DSCC-00  PRM-00   DRL-02   G-00 
      SAS-00     /013W 
                  ------------------0F535A  271253Z /38 
R 271125Z NOV 02 
FM AMEMBASSY ROME 
TO SECSTATE WASHDC 7087 
INFO DEPT OF LABOR WASHDC 
EUROPEAN POLITICAL COLLECTIVE 
 
UNCLAS SECTION 02 OF 02 ROME 005750 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EUR/WE AND DRL/IL 
DOL FOR ILAB/BRUMFIELD, LEVINTOW 
 
E.O. 12958: N/A 
TAGS: ELAB, ECON, PGOV, SOCI, IT 
SUBJECT: FIAT: WORKER PROTESTS CONTINUE; SICILIAN SOLUTION 
IN SIGHT? 
                       UNCLASSIFIED 
 
PAGE 02        ROME  05750  02 OF 02  271251Z 
 
PROMINENT MEMBERS) AND THEIR CONSTITUENTS.  SEVERAL 
PARLIAMENTARIANS HAVE THREATENED TO BLOCK PASSAGE OF THE 
2003 BUDGET ABSENT GUARANTEES THE TERMINI IMERESE PLANT WILL 
REOPEN, AND DEPUTY PRIME MINISTER FINI WARNED FIAT IT WOULD 
"FACE A FIGHT, AND NOT JUST WITH THE SOCIAL PARTNERS" UNLESS 
IT MODIFIED ITS PLAN.  THE GOVERNMENT'S CAR IS ALSO RUNNING 
ON CASH; THE LABOR MINISTRY MUST DECLARE AN EMPLOYMENT 
'STATE OF EMERGENCY' BEFORE FIAT CAN SHIFT THE IDLED WORKERS 
OFF THE PAYROLL INTO AN EMERGENCY UNEMPLOYMENT SCHEME 
FINANCED LARGELY BY THE GOVERNMENT (UNDER WHICH THEY WILL 
RECEIVE A GENEROUS 80 PERCENT OF THEIR SALARY FOR AT LEAST 
ONE YEAR). 
 
7. (SBU) AT THEIR HEART, THE NEGOTIATIONS ARE ABOUT THE 
SICILIAN PLANT'S LONG-TERM PROSPECTS; THIS IS WHERE TERMINI 
IMERESE BECOMES A LEITMOTIF FOR FIAT'S -- AND MORE BROADLY, 
MANUFACTURING'S -- FUTURE IN ITALY.  FOR MANAGEMENT, THE 
PLANT'S IDLING IS AN ACCOUNTING DECISION THAT WILL RESTORE 
THE FIRM TO COMPETITIVENESS AND/OR MAKE IT MORE ATTRACTIVE 
TO GM (FIAT HAS AN OPTION TO SELL GM A CONTROLLING STAKE IN 
THE COMPANY IN 2004).  FIAT HAS SAID IT WILL REOPEN THE 
PLANT IN 12 MONTHS IF SALES OF THE MODEL MANUFACTURED THERE 
IMPROVE.  THE TRADE UNION CONFEDERATIONS ARGUE THE COMPANY 
HAS NOT PRESENTED A COMPREHENSIVE RESTRUCTURING PLAN, WITH 
NEW INVESTMENT IN DESIGN AND PRODUCTION, TO DEMONSTRATE THAT 
IT PLANS TO REOPEN THE PLANT AND MAINTAIN CURRENT EMPLOYMENT 
LEVELS.  THIS REFLECTS THE UNION'S INTEREST IN MAINTAINING A 
VIABLE, INNOVATIVE AUTOMOBILE INDUSTRY IN ITALY, ONE IN 
WHICH TRADITIONAL ITALIAN STRENGTHS IN DESIGN AND 
PRODUCTIVITY WOULD OUTWEIGH LOWER LABOR COSTS OFFSHORE. 
                       UNCLASSIFIED 
 
PAGE 03        ROME  05750  02 OF 02  271251Z 
FIAT'S ACQUISITION BY GM, THEY FEAR, WILL LEAD TO A STEADY 
DECLINE OF MANUFACTURING JOBS AS THE "GM COLOSSUS" SHIFTS 
PRODUCTION TO PLANTS OUTSIDE ITALY. 
 
8. (U) FOR THE GOVERNMENT, SUBSTANTIAL JOB LOSS IS THE 
BRIGHT RED LINE; HOW EMPLOYMENT IS MAINTAINED IS LESS 
IMPORTANT.  CURRENTLY, THREE OPTIONS ARE UNDER PUBLIC 
DISCUSSION: 
 
--  RETOOLING THE PLANT AND PRODUCING NEW MODELS; 
-- SELLING THE PLANT TO ANOTHER AUTO MANUFACTURER; 
-- CONVERTING THE PLANT TO ANOTHER INDUSTRIAL USE (THE 
SICILIAN REGIONAL PRESIDENT HAS SUGGESTED A CONTAINER 
TERMINAL, THOUGH IT IS DIFFICULT TO SEE SUCH A FACILITY 
EMPLOYING SIMILAR NUMBERS OF WORKERS). 
 
9. (U) THE GOVERNMENT HAS SEVERAL TOOLS TO PROMOTE AND 
ACHIEVE ANY OF THESE ALTERNATIVES.  THE FIRST IS A SPECIAL 
DEVELOPMENT FUND FOR SOUTHERN ITALY, WHICH THE GOVERNMENT 
CAN DISPENSE TO OFFSET DEVELOPMENT COSTS (TO RETOOL THE 
PLANT OR HELP FINANCE NEW MANUFACTURING ON THE SITE, FOR 
EXAMPLE).  IT MAY ALSO EMPLOY A VARIETY OF DIFFERENT ACCORDS 
WHICH PROVIDE, WITH THE AGREEMENT OF LABOR, SPECIAL TERMS OF 
EMPLOYMENT (FOR EXAMPLE, WAGE REDUCTIONS OR INCREASED SHIFT 
WORK); IN ESSENCE THESE ACCORDS CARVE OUT EXCEPTIONS TO THE 
NATIONAL LABOR CONTRACTS, OFFERING EMPLOYERS BETTER TERMS IN 
EXCHANGE FOR CREATING JOBS IN HIGH-UNEMPLOYMENT AREAS. 
 
10. (U)  IT'S UNCLEAR WHICH OF THESE REMEDIES, IF ANY, THE 
GOVERNMENT WILL CHOOSE TO EMPLOY.  THE MOST LIKELY SCENARIO 
IS A PROMPT DECLARATION OF THE REQUIRED "STATE OF 
                       UNCLASSIFIED 
 
PAGE 04        ROME  05750  02 OF 02  271251Z 
EMERGENCY," AND COMMENCEMENT OF THE SPECIAL UNEMPLOYMENT 
BENEFITS IN EARLY DECEMBER (WHICH SHOULD ALLOW FIAT TO BEGIN 
REALIZING THE COST SAVINGS IT NEEDS TO MEET ITS LENDORS' 
TERMS), FOLLOWED BY MORE LENGTHY NEGOTIATIONS TO DETERMINE 
THE PLANT'S FUTURE. 
 
11. (SBU) COMMENT: WE SHARE ONE CONTACT'S VIEW THAT THE 
INTENSE FOCUS ON THE TERMINI IMERESE PLANTS SAYS A GREAT 
DEAL ABOUT HOW ITALIANS VIEW -- OR CHOOSE NOT TO VIEW -- 
SOME OF THE UNCOMFORTABLE REALITIES OF THEIR CHANGING 
ECONOMY AND LABOR MARKET.  "THERE HAS BEEN INTENSE PRESS 
COVERAGE OF WHAT AMOUNTS TO 6,000 JOBS, AND VIRTUALLY NONE 
ON THE REGULARIZATION (UNDER WHICH 700,000 PREVIOUSLY 
ILLEGAL IMMIGRANTS RECEIVED LEGAL STATUS)," HE NOTED. 
PERHAPS THAT'S BECAUSE MOST OF THE IMMIGRANTS ARE ALREADY 
FIXTURES OF LOCAL ECONOMIES IN NORTHERN AND CENTRAL ITALY, A 
PHENOMENON MANY HERE WOULD PREFER NOT TO ACKNOWLEDGE.  MANY 
NORTHERN ITALIANS APPEAR ALREADY TO HAVE ACCEPTED THAT A 
DIFFERENT FIAT -- LEANER, PERHAPS MEANER AND NO LONGER 
LOCALLY-OWNED -- WILL EMERGE FROM THIS RESTRUCTURING 
PROCESS.  THEIR SOUTHERN COMPATRIOTS, WITH FEWER ECONOMIC 
OPTIONS, ARE MUCH MORE FOCUSED ON THE IMMEDIATE 
CONSEQUENCES. 
SEMBLER 
 
                       UNCLASSIFIED 
 
> 
 2002ROME05750 - Classification: UNCLASSIFIED