On Wednesday the company announced a restructuring affecting more than 8,000 jobs, the latest in a string of emergency measures to stop widening losses, flagging sales and high debts.

We hope to find an alternative solution, a solution that doesn't leave thousands of Italians...without jobs

Prime Minister Silvio Berlusconi

Investors though appear unsatisfied by the mass redundancies and sold-off Fiat stock after it had already closed at a near 20-year low on Wednesday.

Analysts estimate the lay-offs at Italy's largest private sector employer will save about 250m euros ($246m; �158m) a year compared with an expected operating loss of up to 1.2bn euros in 2002.

Thousands of secondary jobs dependent on the Fiat factories will also probably disappear.

Italy's three powerful unions have called for a four-hour strike on Friday across the Fiat group.

Fiat Auto comprises the Fiat, Alfa-Romeo and Lancia brands, but not Ferrari, which is controlled through another Fiat unit.

Government worried

Workers at what was once Europe's largest carmaker blocked railways and motorways across Italy, to put pressure on the management and government to reverse the decision.

I don't think the 2003 forecast includes the impact of the Fiat crisis...and it's difficult to predict what that impact might be

Industry Minister Antonio Marzano

"We hope to find an alternative solution, a solution that doesn't leave thousands of Italians...without jobs," said Prime Minister Silvio Berlusconi.

He hopes crisis talks will avoid the closure of two plants, one in Sicily and one near Milan.

But the Italian government is in the difficult position of not being able to offer state aid but being reluctant to allow the job losses.

Economic impact

In the past when other Italian businesses looked like going under the government bailed them out, but European Union competition laws now prevent this.

One minister has already hinted that a revision of Italy's 2.3% growth target for next year may be necessary.

"I don't think the 2003 forecast includes the impact of the Fiat crisis...and it's difficult to predict what that impact might be," Industry Minister Antonio Marzano said.

Unemployment shock

The biggest shock was Fiat's decision to close its car plant in Sicily, at a cost of 1,800 jobs.

Unemployment on the Mediterranean island runs at around 20% and Fiat was one of the few major employers.

Italy's latest jobless figures show a deep north-south divide, with 4% unemployment in the north compared with 18.2% in the south.

Overall the figure is near 10-year low of 9%, but Italy is still well above the euro zone average, beaten only by Spain and Finland.

Ratings agency Standard & Poors said Fiat's lay-offs did not change its expectation that the company would be sold to US auto giant General Motors.