Fiat's troubles deepen

Fiat last week asked the Italian government to allow it to ignore employment law and close several factories. Prime Minister Silvio Berlusconi has now said that this will not be allowed to happen. The government cannot intervene directly because of European Union competition law but Berlusconi said that the government will help as much as is possible. The government may extend incentives for consumers to buy new, more environmentally-friendly cars.

Beyond that it is not clear what the government can do to help but internal pressure within Italy, including the announcement by Sicilian deputies that they will not vote for the government's budget for 2003 unless the Fiat plant in Sicily is kept open has forced Berlusconi to act.

The pressure could force Fiat to continue its sales of other businesses including more shares in the Ferrari group. It is increasingly likely that Fiat will eventually have to sell Fiat Auto to General Motors.

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