Turin, home of Fiat, could be the next Detroit if the auto industry moves on

TURIN, Italy ― When U.S. taxpayers bailed out Chrysler in 2008 and 2009, the terms of the deal required the automaker to slash workers’ wages and benefits. Italian automaker Fiat later took control of Chrysler. Now, as the American company nears profitability, its Italian masters are making cuts of their own back home.

After a close vote in January, Fiat’s unionized employees accepted a new contract with management that, the company says, brings their rights in line with the global market. The result leaves Italians wondering how much they will have to sacrifice to keep manufacturing jobs from going to lower-wage countries.

“Workers' rights had been considered like a ladder that you could only climb upward,” said Mario Deaglio, an economist at Turin University. “Now, it has been shown that it is possible to go backward if it is necessary.”

He said Fiat has started a “revolution” in a country where stagnating productivity and rigid labor laws have stifled economic growth in recent decades. “And all this thanks to a process that started in Detroit,” he added.

The wage and benefit cuts that reshaped America’s Motor City have turned Turin, Fiat’s hometown, into a battlefield. To understand how deeply unions have penetrated Italian culture, consider that Fiat’s giant Mirafiori plant overlooks Turin’s Soviet Union Avenue, so named in 1956 and a testament to the strong support once enjoyed by Italy's Communist Party.

At Mirafiori, left-leaning unions staged a series of memorable strikes and protests in the 1960s and 1970s. The factory became the center of Italy's labor movement and its workers’ mood a bellwether for the nation’s turbulent workforce.

In those years, the factory employed more than 100,000 people. Now just about 5,000 work there ― but their heated debate over the new labor contract would have made their forebears proud. After Sergio Marchionne, the down-to-earth and sometimes abrasive CEO of Fiat and Chrysler, had threatened to shut down the historic factory if workers rejected the agreement, the vote become a front-page story in Italy, with political leaders paying visits to the Mirafiori workers. (Prime Minister Silvio Berlusconi was not one of them ― he said that Fiat would be right to leave Italy if unions rejected the agreement.)

Marchionne, a shy 59-year-old whose family moved from Italy to Canada when he was 14, is famous for chairing board meetings wearing his signature black sweater instead of a suit. He became Fiat's CEO in 2004, initially winning praise from workers for saving the company when it was on the verge of bankruptcy. But prior to the Jan. 14 vote he reported receiving death threats.

“The tension was unbearable, my car was vandalized twice,” said Andrea Lipani, a 43-year old assembly line worker who voted in favor of the agreement. “Fiat promised to invest more than 1 billion euros for Mirafiori under the new agreement. You have to be flexible to attract new investment.”

“A few years ago we were sure the factory was going to die,” he added. “Now, five new models will be made here.”

At face value, the new labor agreement for Mirafiori does note change much. It makes small adjustments to workers’ hours working times with the aim, according to a paper published by Fabiano Schivardi, to improve efficiency and productivity, something Italy sorely lacks.

But it also cuts back on union rights. They remain strong ― for example, union workers enjoy 80 hours of paid time to use for union activity ― but the small changes led some to claim that Italian democracy itself was at stake in the vote.

In the end, the new contract passed with just 54 percent of the votes. A poll conducted among workers by Termometro Politico, a news website, said that a majority of those who voted in favor did so because they felt “blackmailed” and feared losing their jobs.

Nina Leone, 47, voted “no” nevertheless: “There was no negotiation. It was take-it-or-leave-it. We couldn't accept it. And we know this is just the beginning.” She blamed the government for taking a back seat and letting the company and unions sort it out by themselves.

State intervention in the economy is common in European countries and especially in Italy. Fiat itself, Deaglio said, has been the beneficiary of many government incentives, bailouts or taxpayer-funded redundancy payments.

“But in 2009,” he added, “Marchionne did something unprecedented. He called for a 1,000 euro ($1,370) tax incentive for new car purchases to be scrapped. He was arguing that companies have to thrive without public support,” something that in Italy sounded nothing less than “revolutionary.”

Workers have taken Marchionne’s views personally. “The time for state help in times of crisis is over,” said Lipani. “I have one son. He is 13 now and I don't know if he'll be able to have a job like mine, I don't even know if he'll be able to stay in Turin.”

The city could be doomed to decline should Fiat decide to move its headquarters somewhere else, such as Detroit, after its merger with Chrysler is finalized. In 2008, just a quarter of Fiat’s cars were produced in Italy. Marchionne has often hinted that this might happen.

Abandoned warehouses and vast, empty industrial buildings dot Turin's streets. But experts agree that this Italian city won’t become a ghost town, even if one of its largest employers leaves. While the automotive sector employs more than 50,000 people, Turin is much less reliant on it than Detroit, Deaglio said. Other sectors, such as research, information technology and film production have boomed in recent years.

After successfully hosting the winter Olympics in 2006, there has also been a resurgence in tourism and Turiners have become more confident: “Fiat once was like a mum for the town,” said Stefano Tassinari, a social entrepreneur. “Now it is perceived like a distant cousin, whose fate interests us, but not exceptionally.”

Sergio Chiamparino, Turin's outgoing mayor, is confident that his town can go “beyond Fiat,” even if he hopes it won't have to do “without Fiat”― “It's possible ― but that would be difficult,” he said.