Fiat in focus as industry crisis deepens In Italy and across the car industry, attention will be focused on Sergio Marchionne on Tuesday as Fiat's chief executive reports quarterly earnings and explains the carmaker's strategy in response to a ruinous European industry-wide crisis. In Fiat's home country, where unemployment is above 10 per cent, union officials and government ministers will be listening for any word of Mr Marchionne's industrial plans amid lingering fears - oft-rebutted by the company itself - that it is preparing to desert Italy. Mr Marchionne and Fiat's chairman John Elkann have this year become lightning rods for controversy amid anxiety about the future of Italy's largest manufacturer by revenues and employees, and broader worries about deindustrialisation. "This country has given much, very much, surely too much to Fiat," Diego Della Valle, head of luxury shoe and bag maker Tod's and a leading critic of Fiat, said last month. But in the car industry, some analysts are faulting Fiat's CEO for different reasons: failing to keep the carmaker's vehicle line-up fresh enough to vanquish its rivals, or to restructure its industrial footprint enough to match flagging European demand. With Italian car sales running at levels last seen in the 1960s, Fiat looks like Europe's most strategically challenged big carmaker this year, barring perhaps only PSA Peugeot Citroën, whose financing arm was bailed out last week by the French state. People who follow Fiat expect the carmaker on Tuesday to revisit its targets set out in a five-year business plan announced in 2010, before the eurozone crisis. "All eyes will be on the future plans," says Marco Cristofori, analyst with Centrobanca in Milan. They will have to lower their 2013-14 targets. Mr Marchionne styles himself as one of the car industry's boldest CEOs, a pitiless critic of carmakers" chronically low margins and historical penchant for destroying shareholder value. In 2009 he seized an opportunity from the collapse of the US car industry, acquiring Chrysler out of bankruptcy and making a spirited but failed bid to wrest Opel from General Motors. The following year he became one of the only CEOs in the industry to confront union and political hostility and close a plant in Sicily. Chrysler's profits are now keeping Fiat afloat as its losses mount in Italy. The group is also buoyed by its profitable business in Brazil, where it is the market leader. Analysts" median consensus is for Fiat to report an operating profit of €910m for the quarter. Fiat's financing arm, unlike Peugeot's, has been insulated from the risk of contagion from its parent's worsening credit rating because it is a joint venture, with French bank Crédit Agricole its majority shareholder. But a surge of restructuring in the European industry has left Fiat's boss looking uncharacteristically behind the curve. GM and Peugeot last week delivered the car industry's most robust response to the eurozone crisis yet when they outlined plans to pool efforts on four vehicle families by 2016. Ford Motor said it would close three of its European plants. Fiat's five plants in Italy are now operating on average at 50 per cent capacity, the lowest level for any major carmaker. Yet Mr Marchionne has said he will not close any plant in Italy. Mr Elkann, heir of the Agnelli family that founded Fiat more than 100 years ago, on Friday met Mario Monti, prime minister, and Giorgio Napolitano, the country's president; he too confirmed Fiat's commitment to produce cars in Italy. It came in the context of withering criticism Fiat faces in Italy for scrapping "Fabbrica Italia," a plan agreed in 2010 to invest €16bn and double vehicle production in Italy to 1.4m units by 2014, and another €4bn in its Fiat Industrial capital goods arm. Fiat pledged the new cars to its Italian plants in exchange for concessions from unions in areas such as working hours, shift patterns and sick leave, needed to make the cars profitably. Instead of building the new model of the Panda, Fiat's second best-selling car, at its efficient plant in Tychy, Poland, where labour costs are about one-third of those in Italy, Mr Marchionne chose to build it in Pomigliano, near Naples, in return for union concessions. But now Fiat has shredded the Fabbrica Italia plan because of the deep downturn in demand for cars in Italy. Last week it said it would temporarily lay off 2,000 employees at the Pomigliano factory for two weeks starting in late November due to weak demand. To make its Italian plants busy again, Mr Marchionne says he wants to put them to work making vehicles for Chrysler, whose plants are now operating at full capacity. However, he says he needs to secure more concessions from unions to make the business case for Italian-made Chryslers, Dodges or Jeeps. Because of Italy's high production costs, the extra expense of shipping the cars across the Atlantic, and risks inherent in the dollar-euro exchange rate, analysts doubt Fiat could do this competitively. "Volkswagen need to make cars for North America locally in Chattanooga and in Puebla, Mexico, and even Audi is saying "we need to localise"," says Stephen Reitman, analyst at Société Générale. The Italian cost base makes it unlikely that Fiat could export a large volume of Chrysler group vehicles economically to the US. Fiat is lobbying the Italian government to ease the tax burden on car exports from the country. Corrado Passera, development minister, said last week that his government was "doing the maximum possible to help companies that export, but within the limits of EU rules and Italy's finances." As rival carmakers, including Peugeot and Ford, take tough action in response to the crisis gripping their European market, the pressure is growing on Mr Marchionne to stem the losses at the historical heart of Fiat in Italy.