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Fiat to Lay Off 7,000 Workers

Italy's Fiat, owners of the Ferrari marque and Formula One team, told union leaders it plans to shed more than 7,000 jobs at its loss-making car arm and sought special crisis status from the government on Wednesday to help pay for the layoffs.

Italy's Fiat, owners of the Ferrari marque and Formula One team, told union leaders it plans to shed more than 7,000 jobs at its loss-making car arm and sought special crisis status from the government on Wednesday to help pay for the layoffs.

The turmoil at Europe's once biggest carmaker cast a gloom over Italy as a union source said the company would place some 20 percent of its Italian automotive workforce on a temporary but long-lasting layoff scheme.

At a meeting between company and union leaders in Rome, the source described the scheme as an "extraordinary" temporary lay-off programme whereby employees receive 80 percent of their salary for over a year from state welfare funds.

"Fiat has asked me to call a state of crisis so that it can have access to welfare instruments," a sombre-looking Italian Welfare Minister Roberto Maroni told reporters.

As Fiat finalised its do-or-die restructuring plan, which also calls for an ambitious roll-out of new models, top management also moved to quash speculation that they might seek to bring forward a 2004 option to sell the car business to General Motors Corp.

Fiat shares hit a new two-decade low of 8.28 euros early in the day and was off 5.05 percent at 8.345 euros just before Milan's close, in line with the European auto sector, which slumped on concerns about U.S. demand.

The job losses are expected to hit most of the company's six assembly lines dotted around the country but sources said the Termini Imerese plant in Sicily faced especially severe cuts.

Some 15,000 people demonstrated in the Sicilian town on Wednesday to protest against the probable lay-offs with students, boy scouts and housewives joining Fiat blue and white-collar workers as they marched through the streets.

Car Losses

Italy's biggest private sector employer, Fiat has a car empire spanning the globe and a host of other businesses ranging from the power industry to insurance and publishing.

The car division made an operational loss of more than 800 million euros in the first half of 2002 and dragged the group deep into the red as once-loyal Italian customers switched to sexier foreign brands.

GM holds 20 percent of Fiat Auto but the Italian company has an option which would allow it to force the world's biggest carmaker to buy the rest from 2004. Many analysts believe the sale is inevitable and say the restructuring plan could be designed to boost Fiat's value ahead of a sell-out.

Umberto Agnelli, head of the Agnelli family's holding companies which control Fiat and whose grandfather founded the carmaker in 1899, told reporters he was "very sad" about the proposed job cuts but said they were a "necessary step".

Agnelli also said it was "unlikely" that Fiat would seek to bring forward the "put" option from 2004.

Government Pressure

Fiat is a monument on Italy's industrial landscape and its predicament has captivated national attention with pressure growing on the government to intervene.

However, Prime Minister Silvio Berlusconi's room for manoeuvre is very limited with state coffers under pressure because of the general economic slowdown and the European Union ready to pounce on anything that hints of state aide.

One minister suggested the government might extend incentives aimed at encouraging consumers to sell old cars and buy ecologically friendly models while another said the state would not abandon those who faced redundancy.

"The government is studying the problem and will swiftly take the necessary steps at least to alleviate the negative impact on the social dimension," said Parliamentary Affairs Minister Carlo Giovanardi.

Laying off workers in Italy's heavily protected labour market is a difficult and time-consuming process.

Fiat announced in June nearly 3,000 job cuts and by seeking "crisis status" it would be able to by-pass legislation that prevents further job cuts and also gain access to special welfare funds to assuage union anger.

Earlier this year, Fiat won an emergency, three billion-euro credit lifeline from banks and is trying to sell non-core assets to cut debts. But a further fall in sales since then has prompted executives to pledge further belt-tightening.

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