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Turin, home of Fiat, could be the next Detroit if the auto industry moves on

Chrysler's new Italian master, Fiat, has battled labor unions and won.

Italy-Turin-Fiat 02 22 2011Enlarge
An employee walks by a sticker on Jan. 14, 2011 warning the employees at Turin's Mirafiori plant that Fiat wants to change their contracts as they will be employed under a joint Fiat-Chrysler operating agreement. (Olivier Morin/AFP/Getty Images)

TURIN, Italy ― When U.S. taxpayers bailed out Chrysler in 2008 and 2009, the terms of the deal required the automaker to slash workers’ wages and benefits. Italian automaker Fiat later took control of Chrysler. Now, as the American company nears profitability, its Italian masters are making cuts of their own back home.

After a close vote in January, Fiat’s unionized employees accepted a new contract with management that, the company says, brings their rights in line with the global market. The result leaves Italians wondering how much they will have to sacrifice to keep manufacturing jobs from going to lower-wage countries.

“Workers' rights had been considered like a ladder that you could only climb upward,” said Mario Deaglio, an economist at Turin University. “Now, it has been shown that it is possible to go backward if it is necessary.”

He said Fiat has started a “revolution” in a country where stagnating productivity and rigid labor laws have stifled economic growth in recent decades. “And all this thanks to a process that started in Detroit,” he added.

The wage and benefit cuts that reshaped America’s Motor City have turned Turin, Fiat’s hometown, into a battlefield. To understand how deeply unions have penetrated Italian culture, consider that Fiat’s giant Mirafiori plant overlooks Turin’s Soviet Union Avenue, so named in 1956 and a testament to the strong support once enjoyed by Italy's Communist Party.

At Mirafiori, left-leaning unions staged a series of memorable strikes and protests in the 1960s and 1970s. The factory became the center of Italy's labor movement and its workers’ mood a bellwether for the nation’s turbulent workforce.

In those years, the factory employed more than 100,000 people. Now just about 5,000 work there ― but their heated debate over the new labor contract would have made their forebears proud. After Sergio Marchionne, the down-to-earth and sometimes abrasive CEO of Fiat and Chrysler, had threatened to shut down the historic factory if workers rejected the agreement, the vote become a front-page story in Italy, with political leaders paying visits to the Mirafiori workers. (Prime Minister Silvio Berlusconi was not one of them ― he said that Fiat would be right to leave Italy if unions rejected the agreement.)

Marchionne, a shy 59-year-old whose family moved from Italy to Canada when he was 14, is famous for chairing board meetings wearing his signature black sweater instead of a suit. He became Fiat's CEO in 2004, initially winning praise from workers for saving the company when it was on the verge of bankruptcy. But prior to the Jan. 14 vote he reported receiving death threats.

“The tension was unbearable, my car was vandalized twice,” said Andrea Lipani, a 43-year old assembly line worker who voted in favor of the agreement. “Fiat promised to invest more than 1 billion euros for Mirafiori under the new agreement. You have to be flexible to attract new investment.”

“A few years ago we were sure the factory was going to die,” he added. “Now, five new models will be made here.”