Productivity is Italy’s biggest problem and will be the next government’s biggest challenge.
Industrial production is down, and labour productivity is not competitive, which means manufacturing jobs are disappearing.
So, car giant Fiat has decided to go global: on the one hand, by merging with American auto maker, Chrysler, and on the other, by investing in innovation, especially in its plants abroad.
The company has recently invested one billion euros in its Melfi factory in southern Italy to buy machinery needed to produce two new car models.
Fiat says it has no intention of closing down factories in Italy, but at the same time, the company recently announced a redundancy fund over two years. The measures effectively mean less work and drastic pay cuts for the plant’s 5,500 employees.
While there is growing concern among the trade unions that many people could lose their jobs due to outsourcing, these workers are trying to stay positive.
The last thing they want is for their factory to close just like Sicily’s Termini Imerese plant did two years ago.
Aldo Caprarella hopes investment of this kind will help his plant keep up in a competitive and innovative environment:
“We will make two extra models, at the moment we are just producing one, here at Fiat. So, we hope there will be enough work for everybody, because this region depends on Fiat and its satellite activities. And now that Fiat has decided to merge with Chrysler, we hope we will benefit from that. So far, the Americans have got most of the benefits, but at Melfi we will make new Jeep models. That’s positive, isn’t it?,” says Aldo.
Fiat’s management calls it internationalisation. But to some, it looks more like outsourcing. What will such a move mean for the company’s Italian workers?
“It would be bad for us if Melfi were to shut down and go to China, but if they decide to make cars both in China and in Melfi, that’s great,” Aldo tells us.
Asked whether he is concerned about the risk of Fiat leaving Italy, Aldo says:
“I don’t think that will happen, because they are rooted in Italy, and Fiat is considered as a product made-in-Italy.”
Aldo Caprarella earns 1,700 euros a month. Some of these workers say that they are ready to accept labour market reforms, such as more flexibility, in order to keep their jobs.
“We are prepared to change some of the rules that have been in place for years. If they need us to work on Saturdays, we will work on Saturdays. We must be competitive in the global market,” says Biagio Amoroso, another Fiat worker.
But unions are sceptical about the job opportunities offered by a global market. The future looks bleak according to this member of the metalworkers’ federation:
“The danger is that the new production lines will dramatically reduce the car-making potential of our 5,500 workers. And even the redundancy fund agreement doesn’t make it clear that all the workers will get their jobs back after a 24-month period,” says Emanuele De Nicola, Regional Secretary of FIOM, the metalworkers’ union.
Productivity levels in Italy are among the lowest in the OECD.
Managers blame union opposition to labour reforms… unions blame companies’ lack of long-term vision.
Another problem, according to economic historian Valerio Castronovo, is that developed countries totally underestimated the economic power of emerging economies:
“We thought it would be easy for developed countries to go global. Italy was among those countries. We were the sixth or seventh most industrialised country in the world. We thought that emerging countries would just make poor quality goods, and wouldn’t be able to reach European and Italian technological standards. That was a mistake, it was short-term thinking.”
“Without a comprehensive project on the future of the car industry, emerging economies will be the only beneficiaries of the outsourcing of production lines from Italy. In Serbia, for instance, they are making a model that could have been produced in Italy,” says FIOM’s Emanuele De Nicola.
We are in the city of Kragujevac in Serbia.
Here, Fiat has built a new, innovative plant on the site of the Zastava factory, best known for its former Yugo cars. Badly damaged in the 1999 NATO bombing, Zastava was bought up by Fiat in 2008.
The plant now produces the new Fiat 500 for the global market.
Goran Ostajic welcomes the change:
“When I first started at Zastava, it was very hard working there. It was cold, it was very hard work. When Fiat came, everything changed: the facilities and the working halls were lighter, it was renovated, warmer. I could go to work knowing I would be warm and not be cold while I worked.”
His son also found a job with Fiat:
“It’s a secure job that allows us to plan for the future. As soon as I graduated from high school, two or three months later, I started working for Fiat, and have been there ever since,” says Goran’s son Aleksandar Ostajic.
The Kragujevac plant employs 1,500 people. They earn between 350 and 400 euros per month, slightly above the average Serbian salary. The old Zastava plant employed 25,000 workers, but there were no machines and salaries were slightly lower than today.
Since the end of the war and the transition from the embargoed, Socialist system to a market economy, Serbian productivity has grown dramatically. But, according to Fiat, there are many more reasons for investing there:
“In Italy, industrial relations are more developed. When it comes to job contracts and workers’ rights here, Serbia is going through a different phase. That doesn’t mean that it is easy for a company to set up a factory here and that there are no workers’ rights. It’s just a different reality, a different context. So, it is possible to do things differently,“says Diego Velini, Fiat manager in Kragujevac.
Asked whether it’s easier to work here than at Melfi or Pomigliano, he tells us:
“I am not an expert in Italian labour law, we are dealing with two different contexts. Anyway, our presence here isn’t only because of the workforce. There are other reasons to justify our investment here, such as the possibility to reach markets worldwide, the location of the plant, our previous experience collaborating with Serbia and a package of advantages offered by the government.”
If Fiat is an example to go by, what Italy needs is a comprehensive set of reforms, based on compromise between management and workers, and boosted by sound political decisions.
The Italian elections may seem far away for the Ostajic family. But their reality is much more closely linked to their Italian colleagues’ political choices than they think.
That, too, is the internationalisation of a market economy.