The embattled Fiat Group will refocus on its car manufacturing enterprises, retrench 12 300 workers, boost capital and invest billions of euros in a bid to return to net profit in three years.

The embattled Fiat Group will refocus on its car manufacturing enterprises, retrench 12 300 workers, boost capital and invest billions of euros in a bid to return to net profit in three years.

The good news for the Italian automaker's local subsidiary, Fiat Auto SA, is that its operations will not be directly affected by the job cuts or restructuring programme.

The plan, which was revealed on Thursday, is designed to steer the Italian conglomerate, which owns Fiat Auto (including Fiat, Alfa Romeo, Ferrari and Maserati), away from its interests in aircraft engines, insurance and agricultural implements, and allow the group, as a whole, to break even at an operating level in 2004.

Giuseppe Morchio, new Fiat chief executive, announced 12 300 job cuts worldwide - alleviated by the creation of 5 400 new jobs - and a capital increase of R16 billion. Fiat aims to boost operating income by R40,9 billion by 2006 by which time the company hopes to show a net profit. The troubled Fiat Auto unit was expected to break even in 2005.

In an opening speech at the presentation of Fiat's restructuring plan, chairman Umberto Agnelli said the company was "in a situation of crisis" and it had all the means to overcome it.

"The receipts from the capital increase, together with the resources from divestments, will allow the group to maintain a solid base of liquidity for the period of the plan," he said.

The capital increase is aimed at underpinning the restructuring plan, which will run from 2003 to 2006. The operation was guaranteed by a consortium of primary Italian and international banks and should get under way in the next two weeks, reported.

"Between 2003 and 2004, the plan foresees the closure of 12 plants, nearly all abroad," the Fiat Group said in a statement.

Italian Prime Minister Silvio Berlusconi, who had been informed of the new strategy, hailed it as an "important step" and voiced satisfaction that it would lead to fewer job cuts than had initially been foreseen.

In reaction, Fiat Auto SA's new managing director Giorgio Gorelli told CARtoday.com that the restructuring plan "was evidently necessary" and "crucial to the company's bid to return to a position of strength in the marketplace".

"The plan represents a new beginning for the Group," he added. "Fiat Auto SA does not have its own plant in South Africa and thus will not be affected by the plan. However, we will endeavour with our local manufacturing partner Nissan SA to constantly improve, update and strengthen our operations here".

Original article from Car