Tavares warns Italian plant costs are twice as high as France, Spain

TURIN – Stellantis CEO Carlos Tavares has told Italian unions that he will work with them to improve competitiveness and cut production costs at factories in Italy, where they currently are up to four times more than in France or Spain for a similar model.

Tavares, who met with union representatives at two former Fiat Chrysler factories in the Turin area this week, said the problem was primarily not labor costs but production costs on models that did not sell in anticipated numbers.

Unions have been worried that the merger of PSA Group and FCA to form Stellantis, which was finalized last month, could result in job losses, especially in Italy. Tavares has pledged not to close any assembly plants in Europe as a result of the merger.

A union source who attended the meeting told Automotive News Europe that Tavares gave workers several examples of the cost discrepancy between the Turin-area plants and those at PSA plants in Europe.

Tavares said the Maserati Levante midsize luxury SUV incurred about 3,300 euros in direct production costs per vehicle at the FCA factory in Mirafiori, while the Ghibli and Quattroporte luxury sedans cost about 6,000 euros per unit at the nearby Officine Giovanni Agnelli factory in Grugliasco.

In contrast, Tavares said that direct production costs for a similar vehicle built in France, such as the DS 7 Crossback built in Mulhouse, would amount to about 1,400 euros.

He said the Fiat New 500 full-electric small car, which is built in another part of the huge Mirafiori complex, incurs about 1,200 euros of direct production costs, compared with 500 euros for the similar Opel Corsa-e built at the PSA plant in Zaragoza, Spain.

A Stellantis spokesman confirmed the figures, explaining that direct production costs included labor; amortization of R&D, tooling and plant structural costs; and energy use.

Three industry experts consulted by ANE for this article said direct production costs represent about 20 percent of the total production cost of a volume model, and up to 35 percent for low-volume premium and luxury models. Material accounts for the remainder.

Tavares reassured Italian unions that labor costs are not the main issue, noting that they are higher at PSA plants in France, but the direct production costs he cited added to worries about the future of the Grugliasco plant, a union source said.

"We feel that it would be very difficult to regain enough competitivity in Grugliasco, given such a wide gap to close not only on French plants, but even to nearby Mirafiori," the source said.

FCA considered Grugliasco, a former Carrozzeria Bertone plant that it bought in 2009, as part of a single manufacturing hub with Mirafiori, which is about 3.5 miles away. That could make it easier to close Grugliasco and move workers to the Mirafiori plant. FCA had moved Maserati workers between the two plants according to model demand for years.

Grugliasco employs 1,149 assembly-line workers and Mirafiori 2,766, according to figures from the FIM-CISL union.

Tavares's message to the workers is that future investments in former FCA plants in Italy should be "right-sized" to improve competitiveness – and not lose future model allocations to other Stellantis plants across Europe.

Industry experts say amortization of R&D, tooling and plant structural costs add up to about 15 percent of total production costs per unit for a specific model.

Those costs do not vary with the production volume. "If you build half of the volume planned for a model, the weight of those costs doubles" on each car sold, an industry executive who asked not to be quoted by name told ANE. "If you build a fourth (of the planned volume), they quadruple."

FCA invested 500 million euros at the Grugliasco plant to launch the Quattroporte in 2012 and the Ghibli a year later. Maximum installed capacity was about 30,000 units annually on two shifts a day, and combined production of the two models peaked at 36,100 in 2014, according to FIM-CISL figures. But total production was just 6,900 in 2019 and fell further to 6,676 last year.

Then in 2014 FCA invested an additional 300 million euros at the Mirafiori complex to install a new manufacturing line, including a paint shop, dedicated to the Maserati Levante SUV. The Levante, which shares its architecture with the Quattroporte and Ghibli, had a good start, with production peaking at 33,960 in 2017.

According to union figures, total Maserati production was 17,694 last year, with 11,018 Levantes at Mirafiori and the rest Quattroportes and Ghiblis at Grugliasco.

The Mirafiori complex was one of the world's largest auto plants when it was inaugurated in 1939 by Fiat founder Giovanni Agnelli and the Italian fascist leader Benito Mussolini. At its peak, more than 50,000 people worked at Mirafiori. By 1997, 26,500 workers built 463,000 vehicles.

It now employs a total of 10,000 production workers and 7,000 office workers, mainly in marketing and sales, R&D and administration. It houses the Levante and New 500 production lines, a stamping facility, a powertrain plant and most of Stellantis' Italian administrative and engineering workers. 

Last year Mirafiori produced 30,026 vehicles, according to the FIM union, of which 19,008 were Fiat New 500s and the rest Levantes.

Tavares has visited other Stellantis plants in Italy recently, and a union source said he was impressed by a level of automation at Cassino and Melfi that was considerable higher than at comparable former PSA plants.

Increasing factory automation was a strategy put in place in the mid-1980s at FCA's predecessor, Fiat Auto, as a reaction to conflicts with unions in the previous decade, which peaked when workers occupied the Mirafiori plant for 35 days in October 1980.

The idea was to weaken dependence on workers – and their contractual power -- by reducing the number of direct jobs. The Melfi plant, which opened in 1993, employed 8,000 people and 340 robots to build up to 400,000 units a year. In contrast the Rivalta plant near Turin that was opened in 1967 (and is now closed) needed almost 18,000 people -- and virtually no robots -- to build 400,000 units a year in the early 1970s.

But seen another way, the high level of automation at those factories -- another form of overinvestment -- might be a barrier to reducing costs. The initial, costly investment needs to be amortized, and overall flexibility is significantly reduced, because humans can be instructed to make things differently faster that machines can be reprogrammed, the union source said.

Andrea Malan contributed reporting