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Fiat rises on resignation talk
MILAN, Italy -- Shares in Fiat rose more than 3 percent on Tuesday on reports that its top two executives may resign just one day after the troubled Italian carmaker began laying off thousands of workers. Chairman Paolo Fresco and Chief Executive Gabriele Galateri are expected to step down at a board meeting on Tuesday, Reuters quoted sources as saying. Enrico Bondi, a manager at bank Mediobanca and former CEO of Telecom Italia, is seen as the most likely replacement for Galateri, according Italian media reports. The Agnelli family, which controls Fiat, is said to want the chairman of its holding company IFI, Gianluigi Gabetti, to take over as chairman.
The company said in a statement that the resignations were not on the agenda for Tuesday's board meeting. However, a source told Reuters: "The fact it isn't on the agenda doesn't mean that they won't present their resignations tomorrow.'' Fiat, Italy's largest industrial group, was up 3.4 percent to 9.40 euros in early morning trading in Milan on Tuesday. Its stocks has fallen almost 50 percent this year as it struggles to cut costs and reduce debt amid increasing competition and falling market share. On Monday, it began laying off 5,600 employees at its loss-making Fiat Auto division. The company wants to cut 8,100 jobs as it pushes through a do-or-die recovery plan. Last minute talks between the company and unions collapsed on Thursday as union leaders refused to accept a government-brokered plan that would have sacrificed about 2,400 jobs in return for securing future employment for thousands of other workers after a series of temporary layoffs. Workers protested the decision by the company to go ahead with the layoffs by picketing outside Fiat Auto plants and blocking access to roads on Friday. Speculation has been mounting for weeks that Fresco will be forced from the top job at Fiat. He is blamed for piling up huge debts to fund the group's diversification out of the car business. Last week, Prime Minister Silvio Berlusconi added his voice to the chorus saying: "If Fiat had the right management it would be able to pull out of the crisis.'' Fiat is under pressure from creditors to reduce its net debt to 3.6 billion euros by early 2003 from 5.8 billion euros at the end of September. At the same time, Fiat car sales have been plummeting. Once the biggest carmaker in Europe, Fiat has slipped to sixth place. Its share of the Italian market fell to 28.2 percent in November -- about half what it was a decade ago. Fiat Auto posted an operating loss of 823 million euros in the first half this year and car sales fell to a record low in November. GM bought 20 percent of Fiat Auto for $2.4 billion in 2000 and it has an option to buy the remaining stake in the unit beginning in 2004. However, the U.S. auto giant has been struggling to make other acquisitions and analysts say the group may want to get out of the Fiat deal. On Tuesday, the trade publication Automotive News reported that Fiat may cancel the deal itself. Spokesman for both Fiat and GM declined to comment on the report. Reuters contributed to this report.
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