UPDATE 4-Italy unveils $1.7 bln car stimulus package

* Italy unveils $1.7 billion package for autos
* Conditional on keeping plants open
* Analysts say may only boost demand short-term

(adds analyst comments, recasts lead to focus on auto sector)
By Giuseppe Fonte and Alberto Sisto
ROME, Feb 6 (Reuters) - Italy unveiled $1.7 billion of
measures to help its struggling car industry on Friday, making
the cash conditional on companies like Fiat keeping plants open.
Analysts said the incentives may only boost demand short-term.
The plan, approved in a decree, includes a payment of up to
1,500 euros for trading in an old car to buy a new, greener one
-- at the high end of expectations.
The total package of over 2 billion euros ($2.56 billion) is
also aimed at the household goods sector and is the latest
attempt by the debt-laden government to boost the economy amid a
global financial crisis.
A broad economic stimulus plan approved in November was
panned as timid and lacking enough funds to make a change and
the country's banks are still waiting for details on support for
the banking sector promised by Rome last year.
Carmakers in turn have been told to maintain their plants in
Italy and pay auto parts suppliers, Prime Minister Silvio
Berlusconi said, as he announced Friday's package.
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Fiat SpA , which dominates the country's car
industry, had warned 60,000 jobs could be at stake if the
government did not act and has closed plants across the country
for short periods to cope with savage falls in demand.
The global financial crisis has prompted a resurgence of
European protectionism amid worries for jobs.
Earlier this week, British workers forced France's Total
to agree to hire domestic workers at a UK refinery.
Analysts have suggested Fiat might have to resort to
permanent closures in order to cope with its near 6 billion
euros of debt and rapid cash burn as it stockpiles unsold
vehicles. [nLU75974]
In January, new car sales in Italy dropped 33 percent --
after a 13 percent fall in December -- in a hiatus between old
incentives to buy greener cars and the mew measures, which
nearly double what buyers get straight away to 1,500 euros.
Germany is offering 2,500 euros for new car purchases as
part of a 1.5 billion euros package for its industry while
France has said it could pump 6 billion euros of aid to its car
makers.

BOOST BUT MORE NEEDED?
Italy's measures could boost car sales by 200,000 units this
year, leading to a 10 percent annual drop in car sales instead
of a 20 percent fall forecast previously, said Serge Escude of
Cassa Lombarda bank.
"The measures on incentives to buy new cars are in line with
what the market was expecting, towards the higher end of the
range," Escude said.
Auto industry research group Promotor said the Italian
incentives could mean car sales this year come near to those of
2008, but its head Gian Primo Quagliano added "producers also
need to do their part with discounts and promotions."
Italian car sales, before the decree, were expected to fall
17 percent this year, after a 13 percent drop in 2008.
Analysts also noted the package did not appear to include
help on loans for potential car buyers.
Foreign car makers' association UNRAE welcomed the
incentives and said the one-off payments could have an impact as
soon as February but added measures to help credit were
"indispensable, not to say urgent."
For the government, the measures could boost consumer
spending by between 0.5 percent and 1 percent of gross domestic
product this year, Berlusconi said.
The government would cover the costs of the package in part
through lower payouts for temporary layoffs and increased tax
revenues, according to slides from the prime minister's office.
The decree goes into effect immediately, but must be
approved by parliament within 60 days.
Shares of Fiat were 6.78 percent higher near the market
close, while shares of appliance maker De Longhi rose
5.62 percent. The shares of brake maker Brembo were up
1.44 percent, while kitchen goods maker Elica's stock
was up 1.3 percent.
The whole auto industry in Italy employs 375,000 people
either directly or indirectly.
The household appliance sector has also warned of worrying
signs for 2009 after being hit by the economic slowdown last
year.
-- Additional reporting by Stefano Rebaudo
(Writing by Deepa Babington and Jo Winterbottom; Editing by
David Cowell)
((deepa.babington@reuters.com; + 39 06 8522 4369; Reuters
Messaging: deepa.babington.reuters.com@reuters.net))
($1=.7807 Euro)

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