Fiat has shut down most of its Italian plants for a month, laying off 48,000 workers for an extended holiday.
The action comes as the world financial crisis is causing a critical drop in demand for new cars.
The shutdowns through mid-January affect 14 of Fiat's 20 factories in Italy and more than half of its Italian workforce, AP news agency said on Tuesday.
Under the temporary layoff scheme, part of the workers' salaries are paid by a government-administered fund that includes industry contributions.
Fiat sold 71,000 new cars in November, which is 25 per cent less than the 94,600 cars sold the same month a year earlier.
The Turin-based automaker earlier laid off workers for periods this autumn.
Fiat Group Automobiles said in a statement on Tuesday that despite the drop in sales, its European market share had improved slightly to 8.3 per cent, up from 8.2 per cent a year earlier.
Sergio Marchionne, Chief Executive Officer of Fiat Group Automobiles, has said he foresees a consolidation in the car industry.
"Independence in this business is no longer sustainable," Automotive News quoted him as saying, leading to speculation in the Italian media of possible partners for Fiat.
Marchionne said that "the only way for companies to survive is if they make more than 5.5 million cars a year.''
Fiat sold a total of 2.2 million cars and light commercial vehicles in 2007.