Fiat S.p.A. on Wednesday said that the company has suspended a 500 million euro ($710 million) investment into its Officine Automobilistiche Grugliasco (formerly Corrozzeria Bertone) plant in Turin as it did not manage to reach an agreement with union FIOM over a new labour contract at the site.
FIOM is part of Italy’s biggest trade union CGIL
The investment is part of a EUR20 billion plan to improve efficiency and use up excess production capacity at Fiat’s plants in Italy and double production by 2014.
Dubbed Fabbrica Italia, the plan underlines its efforts to gain scale through its partnership with Chrysler Group LLC.
Marchionne aims to merge Fiat and Chrysler in the next few years.
The Italian company took a controlling stake in the American carmaker in 2009 under a US government rescue plan and has turned its fortunes around since.
Last month Fiat raised its stake in Chrysler from 20 to 25% and Marchionne said this could go up to 51% by the end of this year.