By Giulio Piovaccari and Nick Carey

MILAN (Reuters) – A latest disagreement between Italian Prime Minister Giorgia Meloni and Stellantis (NYSE:) CEO Carlos Tavares has uncovered a troublesome new actuality: Europe’s one-time homegrown nationwide automakers have grow to be world gamers prepared to use the EU’s overcapacity of automotive factories to acquire higher authorities offers.

Stellantis, created by the mix of France’s Peugeot (OTC:) maker Peugeot PSA, Italy’s Fiat and Detroit’s Chrysler, accounts for just about all of Italy’s automotive manufacturing. Fiat output has been falling as European gross sales have stagnated and Stellantis has shifted manufacturing to different nations in its sprawling world community.

Stellantis’ capability utilisation charge at its European factories stood at 56% final yr, down from 64% in 2019 and nicely under the 71% charge at Volkswagen (ETR:), based on GlobalData knowledge supplied to Reuters. Automakers purpose for not less than 80% capability utilization.

Stellantis is utilizing its extra manufacturing capability for leverage in bargaining for subsidies and coverage help from Rome and governments in different nations. In america, state and federal officers provided subsidies to steer Tavares to not shut a Jeep plant in Illinois, which can now be used to construct a brand new midsize pickup truck that fills a niche within the firm’s U.S. mannequin lineup.

The world’s third-largest automaker has to this point allotted extra European electric-vehicle manufacturing to France, Justin Cox, director of world manufacturing at GlobalData, informed Reuters. The corporate’s North American truck and Jeep SUV operations generate nearly all of the group’s revenue. Stellantis will report 2023 monetary outcomes on Thursday.

“You may see why the Italians are upset … Italy has bought a hell of lots to lose,” Cox stated. “All of their quantity manufacturing is tied up with Stellantis.”

On paper, France and Italy seem evenly matched inside Stellantis’ manufacturing system. Stellantis constructed 735,000 autos in France in 2023 and 750,000 in Italy.

However Stellantis is Italy’s sole main automaker, whereas France may also lean on Renault (EPA:) and is bolstered by extra deliberate future EV fashions. Italy’s complete automotive manufacturing stood at round 800,000 autos final yr, versus 1.5 million models in France, based on AlixPartners.

Italian officers have demanded that Tavares rebuild Fiat manufacturing to 1 million autos a yr. Meloni has criticized Stellantis’ selections in nationalistic phrases.

Meloni stated in Parliament that the “alleged” merger that created Stellantis “really disguised a French takeover.” She added: “It is no coincidence that the group’s industrial decisions take France’s pursuits in larger consideration than Italian ones.”

Tavares – who has made Stellantis one of many business’s most worthwhile firms – has countered that the automaker is “not afraid of the 1 million mark … However let’s not overlook that it all the time (relies on) the dimensions of the market.”

Tavares and Stellantis Chair John Elkann, scion of Italy’s Agnelli household, have engaged in talks with the Meloni authorities. The corporate has stated Rome should do its half to help elevated output – give incentives for shoppers to purchase EVs, decrease vitality prices and encourage the event of the EV charging community.

Earlier this month, Italy launched a brand new auto buy incentive, value 950 million euro ($1 billion) for this yr.

Stellantis has been shifting manufacturing of cheaper autos to low-cost nations, assigning costlier fashions to France or Italy.

Rome’s discontent displays a rising consciousness it has few instruments to leverage Stellantis’ selections, stated Marco Santino, a associate at administration consultants Oliver Wyman.

“Stellantis has no plans to divest from Italy, or from France,” he stated. “However it’s a worldwide group, which doesn’t make industrial decisions primarily based on nationwide preferences.”

Stellantis and its European rivals now face weakening automotive demand and intensifying competitors, which often means decrease costs and difficult decisions. Chinese language automakers are ramping up shipments of EVs that they’re providing at costs European producers can not match in the event that they wish to flip a revenue.

Italy, EU’s third-biggest economic system, is house to Europe’s second-largest auto components business, based on native auto foyer ANFIA.

However 40% of suppliers specialize in combustion-engine know-how and greater than 70% are nonetheless uncovered to it.

Santino stated “mind” capabilities in Stellantis, resembling engineering, R&D and platform design, have progressively shifted away from Italy since Stellantis was shaped, as PSA was additional forward in growing EVs than Fiat-Chrysler.

“The French auto half business … is now extra revolutionary and stronger,” Santino stated. “That is the actual imbalance.”

France is one in every of Stellantis’ foremost traders with a 6.1% stake by way of state-backed funding financial institution Bpifrance, and has a consultant on its board.

Italy has no presence within the group, however Business Minister Adolfo Urso has stated Rome is open to purchasing a stake.

“Product allocation doesn’t rely upon governance,” stated Francesco Zirpoli, a administration professor at Venice College, who notes Stellantis, and PSA earlier than it, have all the time made plenty of automobiles in Spain.

Gross sales additionally matter.

Absolutely electrical automobiles made up solely 4% of Italy’s new automotive gross sales in 2023, however nearly 17% in France.

“Italy is just not perceived as a type of nations believing within the transition” to EVs, Zirpoli stated.

Fairly than complaints, “a better concept could be to shift talks over a sensible stage, like convincing Tavares to maneuver again some EV-related R&D and product improvement capabilities to Turin, the place abilities are nonetheless excessive,” he stated.

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