Labour costs threaten crucial alliance
15 April 2009

Fiat will walk away from a deal with Chrysler if the US car maker’s unions refuse substantial labour cost reductions, Fiat CEO Sergio Marchionne has warned.

Chrysler is already in dire financial difficulties and many see a deal with Fiat as the last chance to save the company from bankruptcy and possible liquidation.

Fiat is understood to be pushing for the lower labour costs of Japanese and German-owned plants in the US and Canada and says it is prepared to look elsewhere for an international partner if Chrysler cannot match them.

Marchionne said in an interview: “Absolutely we are prepared to walk. There is no doubt in my mind. We cannot commit to this organisation unless we see light at the end of the tunnel.”

Marchionne believes there is only a 50-50 chance that a partnership with Chrysler will be formed because of the slow negotiations on labour costs, especially in Canada.

He also said he could become Chrysler's CEO. "Fundamentally, that's possible, but the title isn't important. What's important is that they hear me. It's possible that I will have to divide my time between running Fiat and running Chrysler.”

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