Fiat to close Italy factory if Europe market slump continues

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Auto giant Fiat will be forced to close down one of its factories in Italy if the European car market continues to slump, unless sales to the Unites States can be increased, the company's head said Wednesday.

"If the uptake levels in Europe remain the same over the next 24 to 36 months, there will be one too many factories in Italy," Fiat head Sergio Marchionne was quoted as saying by the Corriere della Sera daily.

"If we manage to orient production capacity towards the United States, the problem would disappear," he said, referring to a plan to increase the sales of cars produced in Italy to the United State, where the market is in better health.

"We will continue to sustain investments in Italy based on the performance of the market here, which has never been this low," he said, as the automobile sector in Europe continues to be hit hard by the economic crisis.

In Italy, new car sales slumped in June for the ninth month in a row, dropping 24.4 per cent on a 12-month basis according to the transport ministry.

Sales of new cars were down 19.73 per cent in Italy in the first six months of the year, compared to the same period in 2011, the ministry said on Monday.

The Fiat group, which includes the Lancia, Alfa Romeo, Chrysler, Jeep and Dodge brands, saw a 23.38 percent drop in sales in June on a 12-month basis.

But the group's share of the market rose slightly to 30.7 per cent, compared to 30.3 per cent in June 2011.

Fiat is currently benefiting from profit banked by its US partner Chrysler -- which saw sales jump 30 percent in May compared to a year earlier -- without which it would be in the red.

In a reference to the legal problems the company has faced in Italy in attempting to streamline production and contracts in the face of some union resistance, Marchionne said: "We need tranquility to produce in Italy."

Last month an Italian court ordered Fiat to hire 145 workers who are members of Italy's biggest metalworkers' union, after finding the company guilty of discrimination against them. Fiat said it will challenge the decision.