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Fiat SpA (F.MI) Thursday said it plans to keep production of cars at its Termini Imerese plant in Sicily only until 2011 as the Italian car maker seeks to contain costs to face the economic crisis.

Fiat Chief Executive Sergio Marchionne told a meeting with the government and the company's labor unions that the Termini Imerese plant, which employs about 1,700 people, would be retooled from 2012. He didn't elaborate.

Fiat said it would define a layoff plan at its agricultural and construction equipment unit CNH. Marchionne told a meeting attended by Italian Premier Silvio Berlusconi and union officials that it was hard to maintain employment levels due to the recession.

The Italian economy is expected to contract by more than 5% this year, after shrinking by 1% in 2008, marking the worst recession since World War II.

Workers at the Termini Imerese facility went on strike last month, fearing the closure of their plant. Further protests are likely, according to analysts.

The Italian government and Fiat could agree to a EUR900 million financing plan to help keep its plants running near full capacity, daily la Repubblica said Thursday.

The government last month said it would continue to help Fiat only if it keeps its five Italian plants open as it seeks to expand to create one of the world's largest automakers.

Fiat last week took a stake and management control of Chrysler after the U.S. car maker emerged from bankruptcy protection.

-By Giada Zampano and Luca Di Leo, Dow Jones Newswires; +39 06 697 66921; luca.dileo@dowjones.com