Fiat closures make incentive talks tough: minister

Fiat's decision to shut all its Italian plants for two weeks as orders crumble makes its talks with Rome on shuttering a Sicily plant tougher, the minister in charge of incentives for car purhases said.

The plants will be closed from February 22, a spokesman said, after Chief Executive Sergio Marchionne said on Monday that January sales had demonstrated the market would be "drastically cut" without incentives.

"It makes it more difficult," Industry Minister Claudio Scajola said on Wednesday of Fiat's decision to idle all its plants, referring to a meeting on Friday between Fiat and Rome on incentives and production.

The two parties last met publicly just before Christmas.

European car sales edged 1.6 per cent lower in 2009, saved from a sharper drop by generous incentives from governments to help the industry, and avoid job losses and plant closures.

Marchionne - who also heads US car maker Chrysler, in wich Fiat has 20 per cent - has repeatedly said Europe must confront overcapacity with plant closures as the United States has done.

European car maker Saab became the latest to escape closure on Tuesday when tiny Dutch auto group Spyker stepped in to buy it from former bankrupt General Motors of the United States.

GM wants to close its plant in Antwerp, Belgium, and cut more than 8,000 jobs in Europe to revive its Opel brand but has met with even fiercer labour opposition than Fiat.

Marchionne has forecast a fall of 16 per cent in the European market in 2010 if incentives are not renewed. He has said he would prefer a gradual reduction in tax breaks, perhaps over two years.

Scajola said on Wednesday incentives "are a drug and long-term, they destabilise the market."

However, he has said they will be extended in some form and details are likely in mid-February. Foreign carmakers' group UNRAE says the tax breaks will likely focus on methane vehicles - a Fiat strength.

In Italy, 2009 car sales totalled 2.158 million vehicles - broadly flat on 2008 but incentives to trade in older cars for more fuel-efficient vehicles expired on December 31.

Auto industry group Anfia said Italian car sales could fall 21 per cent to 1.7 million units without tax breaks.

While Fiat waits on the government's decision on incentives, sales are sliding and Marchionne wants to avoid a costly build-up of inventory. Temporary closures were a feature of 2009, with the Pomigliano plant near Naples working for barely 3 months.

The Fiat chief has said he wants to halt car production completely at the Termini Imerese plant in Sicily, but has offered in return to move Panda production to Pomigliano from Poland and a boost in Italy output by more than half to as much as 1 million units in 2012.

Fiat shares have slipped this week on concerns about sales given the uncertainty over incentives. At 1137 GMT, they were down 2 per cent to €9.27 as the DJ Stoxx auto index lost 0.88 per cent.