MILAN/ROME (Reuters) - Italy's Fiat and the Italian government said on Saturday they will look for ways to improve the company's manufacturing efficiency, as the automaker pledged to keep building cars in Italy while shifting its focus to foreign export markets.
Fiat's <FIA.MI> decision in late August to freeze planned investments to avoid further losses in a weak car market has sparked a firestorm of criticism from trade unions and politicians.
Unions are worried about potential job losses if the company eventually shifts manufacturing to countries where wages are lower.
Fiat said in a statement it planned to "re-orient" its business model in Italy "to focus on exports, particularly outside of Europe."
That means, a person familiar with the situation said, Fiat could focus on possibly making Jeep and Chrysler models for export.
Italy's Prime Minister Mario Monti and three cabinet ministers met for five hours with Fiat chief executive Sergio Marchionne and chairman John Elkann at the prime minister's office in Rome.
At the meeting, Fiat outlined its forecasts for the Italian and European markets, focusing on the strategic prospects offered by its integration with its U.S. unit Chrysler, the statement said, without providing any details.
Fiat CEO Marchionne has previously said he does not see the Italian car market recovering until at least 2014. Fiat recently postponed the launch of its new Punto compact to 2015.
"Fiat also confirmed its strategy of investing in Italy, at the right moment, to develop new products to take full advantage of the recovery of the European market," the statement said, mentioning research and development as an example.
The Industry Ministry will set up a working group to examine how to improve Fiat's export capacity, the statement said.
Fiat plans to release full details of its new investment plans on October 30.
Marchionne and Elkann left Monti's office without speaking to journalists.
The carefully-worded statement made no mention of further production halts or temporary layoffs, which Fiat is expected to continue throughout autumn to match slack demand.
"It's a good thing that Fiat renewed its pledge to stay in Italy, where it aims to strengthen its competitiveness in research and innovation," said UILM trade union secretary Rocco Palombella in a statement.
"In effect, the company has confirmed its plans to invest in Italy at the first sign of a recovery in the European market."
(Reporting by Jennifer Clark, Alberto Sisto, Catherine Hornby; Editing by Sophie Hares)