The Italian government and unions have hit back swiftly at Fiat Group's announcement yesterday that it plans to halt domestic production for two weeks next month with the responsible Minister Claudio Scajola calling the decision "inopportune". Fiat said yesterday that it will halt all Italian car production for two weeks, from February 22 to March 7, as it says demand has "sharply declined" compared to January last year, with some 30,000 workers set to take advantage of the government's temporary redundancy scheme during the period.

The decision comes against the backdrop of a Fiat Group presentation last month in Rome made in front of national and regional government and union leaders when Fiat CEO Sergio Marchionne pledged to significantly ramp up Italian production over the next two years while confirming plans to stick to his timetable to close the threatened Termini Imerese factory in Sicily next year when production of the current-generation Lancia Ypsilon.

The news also comes a just day after the Fiat Group reported a fourth quarter and full year loss, its performance dragged down in particular by a lack of demand at its CNH Global (agriculture and construction equipment) and Iveco (trucks and buses) divisions, although overall Group debt levels dropped by 1.5 billion euros and the carmaker forecast a profitable 2010.

Scajola said that Fiat's decision to call a temporary lay-off at all plants is "undoubtedly inopportune at this time" and "will do nothing to help solve the dispute," reported the AGI news agency today. The Minister for Development was being interviewed on SkyTg24. "We are in constant touch with Fiat, but we were unaware of the decision to make yesterday's announcement" he said, adding "I hope that we will be able to salvage the situation."

Secretary General of the CISL trade union federation, Raffaele Bonanni, was also reported by AGI this morning as criticising Fiat's decision. Speaking on the sidelines of the Confsal congress, he commented: "It is odd that we met with Fiat before Christmas and between one meeting and the next 30,000 workers are temporarily laid off. It is a strange way to proceed." He added: "some may call it blackmail."

Fiat is locked into an increasingly bitter stand-off with the Italian government and unions over the proposed closure of Termini Imerese, the smallest of the carmaker's six domestic plants, which employs around 1,400 staff. Geographically isolated due to its island location, this status pushes up the cost of local production to around 1,000 euros extra per car. The next-generation Ypsilon will instead be built in Poland. Sicily is an Italian unemployment black spot and losing the factory, located near Palermo, would be a huge blow to a deprived region. Scanjola is on record as saying that Fiat would be "crazy" to close Termini Imerese. In the government's favour is Fiat's reliance on state subsidies for new car purchases in Italy with a year ahead that promises to be tough for all European carmakers. The Italian government offers subsidies for consumers against the purchase of efficient cars, and Fiat is able to strongly take advantage of this position, and in particular buyers have been able to cash in on large discounts for the purchase of methane-powered cars.