ROME (AP) -- The Italian government urged Fiat on Tuesday to increase auto production in the country and said talks about restructuring plans would continue amid plummeting demand in the sector.
CEO Sergio Marchionne discussed Fiat's plans with Economic Development Minister Claudio Scajola ahead of a meeting scheduled before Christmas with the Italian premier and unions amid concerns that more layoffs may be in the offing.
"I cannot but repeat that the government is seeking a strong increase in auto production in Italy, and that the government agrees with Fiat that production has to become more efficient," Scajola told a press conference after the meeting.
Marchionne said the two didn't discuss whether Italy's cash-for-clunkers incentives would be continued beyond the end of the year.
He has been asking for an extension to the incentives to encourage drivers of older, more polluting cars to scrap them in favor of newer models. Fiat's small clean fuel technology has benefited from such programs.
The government, meanwhile, is pressing Fiat, which also operates plants in Poland and Brazil, to increase production in Italy.
Marchionne is trying to return the Italian automaker to profitability in the face of plummeting consumer demand for new cars and is steering the reorganization of Chrysler LCC, which Fiat took over in June after it emerged from bankruptcy protection.
Tensions flared last week after Scajola said closing Fiat's Sicily plant would be a "folly." Marchionne retorted that "one should understand the numbers before using heavy words like 'folly.'"
Scajola acknowledged in a letter to the newspaper "Il Giornale" that cars coming out of Sicily's Termini Imerese plant cost euro800 ($1,200) more than those from other plants. Scajola said the difference was due to economic disparities in the region and the high costs of infrastructure. But he said the federal and local governments were willing to invest euro400 million ($600 million) to keep the plant working.
Fiat has said it would stop making the Lancia Ypsilon at the plant in 2011, and replace it with another unspecified, nonautomotive production.
Marchionne confirmed that timeline Tuesday, saying nothing had changed.
"What can change is the commitment towards the different development of the plant, which we'll work on with the minister in the future," he said.
Scajola said he had told Marchionne that both the national government and the regions "were ready to do their part to increase the competitiveness of the automotive sector in our country."
Fiat employs about 21,000 workers in five Italian plants.
Like other automakers around the world, Fiat has lowered production to cope with lower demand and put thousands of workers at its plants on temporary layoffs with reduced pay. Under Italian law, companies can do so for a period not to exceed 12 months in any 24 month period.