Fiat Chrysler merger finally starting to bloom in Italy

MELFI & MILAN, ITALY -- On a cool summer day last month about 250 autoworkers arrived at the Jeep plant in Melfi for their first day, another real sign the 6-year-old Fiat-Chrysler merger is finally benefiting Italy.

Less than a year ago, most employees at the plant worked one week per month. The plant now employs nearly 7,700, runs three shifts and exports Jeep Renegade SUVs and Fiat 500 crossovers to North America.

In Milan, just two days after the new Jeep workers were hired, FCA CEO Sergio Marchionne and Chairman John Elkann unveiled the Alfa Romeo Giulia before a crowd of hundreds. The two executives promised the car will be built in Italy as part of a new wave of vehicles focused on high-end performance and winning Italian design.

Marchionne and Elkann, used the Alfa Romeo event to assure Italians that the automaker is committed to the home country. Workers and residents have worried the new Fiat Chrysler was pulling away from Italy, caring more about investment in North America, South America and Asia.

"Alfa Romeo is our Turandot," Marchionne said in reference to the famous opera by Giacomo Puccini, completed by Franco Alfano. "It is a masterpiece that has been a long time in coming."

Fiat floundered

There are many reasons for Italy's fears.

Marchionne's recent drive to spark industry consolidation and actively seek a merger with General Motors or another automaker is creating uneasiness in Italy and Auburn Hills, Mich., where most Chrysler employees are based.

The search for a partner comes just months after Marchionne and Elkann renamed the automaker Fiat Chrysler Automobiles, moved its official headquarters to London and incorporated the combined company in the Netherlands.

Marchionne also listed new FCA stock on the New York Stock Exchange -- a move that over time will shift the shareholder profile away from the Milan Stock Exchange.

Chrysler also has been the unexpected darling of the company, rebounding quickly after bankruptcy as Fiat lost money for several years in Europe.

In the U.S., the automaker's sales have risen for 63 consecutive months, and the automaker's U.S. hourly workforce has climbed to 36,000 from 26,000 in 2011.

Fiat and Chrysler invested billions to retool plants in Detroit, Sterling Heights, Toledo, Kokomo, Ind., and Belevidere, Ill.

Meanwhile, in Italy, a number of product plans were put on hold as a European recession deepened, forcing Fiat to layoff workers on a rotating basis for several weeks per month.

The lack of new models hurt the company. Fiat's market share in Europe, which stood at 7.1% in 2009, has declined to 4.9% for the first six months of this year, according to the European Automobile Manufacturers Association.

"Once he started the merger with Chrysler, people started saying 'why is he not investing in Italy?'" said Giorgio Barba Navaretti, a professor of economics at the University of Milan.

And once Europe's recession began, Marchionne, "made a very blunt decision not to invest anymore."

That changed when Marchionne decided to turn Italy's plants into an export hub for Maserati, Jeep and Alfa Romeo.

In recent years the automaker has renovated its plant in Grugliasco to build the Maserati Quatroportte and Ghibli sedans, its plant in Melfi to build the Jeep Renegade SUV and Fiat 500X crossover and its plant in Cassino, Italy, to build the Alfa Romeo Giulia and Giulietta sedans.

"Now, since about the summer of last year, people are really starting to believe in this plan in Italy and…they are starting to believe again that Fiat can rebuild in Italy," Navaretti said.

"A culture capable of transforming itself"

Elkann, great-great-grandson of Fiat founder Giovanni Agnelli, reaffirmed his commitment to Italy when he spoke at a dinner at the Alfa Romeo museum after the unveiling of the Giulia.

"For more than a century my family has been involved in many ambitious projects in the automotive world," Elkann said. "Our desire and enthusiasm for creating unique, captivating cars has not changed. It is part of our DNA. It is what we do and will continue to do in the future."

In Italy, the reveal of the Giulia was viewed not only as the potential rebirth and renaissance of storied race car brand but also as a potential pathway for Italy to regain carmaking respect on the world stage.

The automaker's $7 billion plan to reinvigorate Alfa Romeo and reintroduce it to the U.S. is as much about keeping Italy's plants running, its workers employed and reinvigorating a storied Italian brand as it is about gaining market share in North America and Europe.

The engineering and the design of the new Alfa Romeo models is all being done in Italy by a group of more than 600 engineers near Modena.

The Giulia will be built in Cassino, located half way between Rome and Naples, where the unemployment rate for young Italians is as high as 30%. The plant currently employs about 4,000 workers who build the Alfa Romeo Giulietta.

"The Giulia and the future Alfa Romeo models come from a grand tradition. They are the product of a culture capable of transforming itself to meet new technological challenges and build a future," Elkann said. "And when they exit our factories – all Italian – they will bring the world what the world has always appreciated about our country."

'Italian heart"

In Melfi, the Fiat plant is now known as the Jeep plant.

It opened in 1992 and built the Fiat Punto, a supermini car, for most of its existence.

In 2012, the automaker announced it would invest about $2 billion to retool the plant so it could assemble the Jeep Renegade and Fiat 500X.

The Jeep Renegade -- a compact SUV that went on sale in the U.S. in May -- was designed in Auburn Hills.

But in Melfi, a town in central Italy in an agricultural area, the Jeep has quickly become a source of pride and a godsend for a job-starved area.

The workers were given one-week training courses to learn the Jeep brand and culture. Teams of workers made posters, now pinned to a wall inside the plant, illustrating their vision of what the Jeep brand means.

"American styling, Italian heart," reads one of the posters.

"There is a pride here to make Jeep because it is American," said Gianfranco Cinquefiori, manager of the plant's stamping division.

Melfi's workers celebrated the start of production for the Renegade in September. Today, the plant employs 7,690 workers and churns out an average of 1,450 Jeep Renegade SUVs, Fiat 500 crossovers and Fiat Puntos per day. Another 3,330 work for 18 suppliers at an adjacent supplier park.

"Two years ago, because of lower production volume, the workers were working about one week per month," said Ennico Meccia, manager of the final assembly shop at the plant. "Now, we work 20 shifts per week and operate seven days per week."

The renovation, he said, "was a dramatic change in the life of the people of this region in southern Italy."

New 4-year labor deal

On Tuesday, FCA and tractor manufacturer CNH Industrial signed a four-year labor deal for workers in Italy, beginning to quell several years of acrimony with its Italian unions.

The agreement, which applies to the two companies 85,000 Italian employees, includes a performance-based compensation structure linked to efficiency and profitability targets. Employees would be entitled to bonuses of between from $7,700 to $11,700 over four years.

The automaker said the agreement, "reflects the proactive collaboration demonstrated by the trade unions."

The deal was signed by the FIM-CISL, UILM-UIL, FISMIC, UGL Metalmeccanici and Associazione Quadri e Capi Fiat unions.

FIOM union, which has repeatedly clashed with Fiat over pay and conditions in Italian plants, did not participate.

Michele Lastella, who works at the Melfi plant, said last month that Italy's unions have fought hard for workers throughout the recession.

"I think if it were not for the unions here in Melfi to sign important agreements, we would not have had this great opportunities," said Lastella, who is a member of FISMIC. "Personally, I feel I'm very well represented by my organization that has always thought about how to create jobs in this territory."

Finally, sales growth

In Italy, the economy and auto industry are finally beginning to recover after industry volumes fell to their lowest levels since 1979.

In June, sales of FCA's cars and crossovers increased 20% in Italy compared with the same month last year.

For the first six months of this year the automaker sold 248,000 cars, crossovers and SUVs in Italy, a 17% increase and the highest volume in 10 years.

The Jeep Renegade is contributing to the company's sales gains. From Turin to Naples, Italians are buying the Renegade. So far this year the company has sold more than 16,000 Jeep SUVs, a 269% increase compared with the same period last year.

The automaker's sales rebound, combined with the investments to assemble and export Jeeps, Maserati's and Alfa Romeo's from Italy are beginning to change the perception of the company in Italy, said Scott Garberding, head of global purchasing and senior vice president of manufacturing.

"It's really caused the blood to flow in the organization here," said Garberding, who moved from Michigan to Italy about 20 months ago. "We are working really hard right now to support growth, which is something that has not happened for a number of years."

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.