Fiat confirms Italy plants will produce U.S. cars

Reuters Business News
Posted: Sep 25, 2012 5:36 PM
Fiat confirms Italy plants will produce U.S. cars

By Silvia Aloisi and Alberto Sisto

MILAN/ROME (Reuters) - Fiat SpA <FIA.MI> confirmed on Tuesday plans to have its Italian factories make cars to be sold outside Europe, particularly in the United States, as it looks to counter a five-year slump in European sales.

Fiat, which also runs Chrysler Group LLC in the United States, would not say which models it intends to produce in Italy for the U.S. market. Analysts have said that the models would likely be Jeeps and Chryslers.

This would mark the first time that Fiat's Italian plants have produced cars for the United States. The automaker has been making the Fiat 500 subcompact for the U.S. market at a Chrysler plant in Mexico.

Fiat's chief executive, Sergio Marchionne, said on Tuesday that Italy and Europe could no longer be considered the only end markets for the automaker.

"We can and we must think of the car sector in Italy in a different way, refocus it, so that it becomes an important production centre for exports outside Europe," Marchionne said in a speech to workers in Turin. "In our case, that means above all the United States."

Fiat had already said after a meeting over the weekend between Marchionne and Prime Minister Mario Monti that its idled Italian factories should be geared for exports outside Europe, where demand for cars is weak because of a debt crisis and economic downturn.

The U.S. car market is growing, and Chrysler plants are running at full capacity.

Marchionne also said that Fiat cannot do everything alone, and he called on Italian and European authorities to help manufacturers become more competitive in global markets.

He said the European Central Bank should make it easier to obtain credit and the EU Commission should make sure that free trade agreements did not favour the Japanese and South Korean automotive industry.

Brussels must also guarantee a level playing fields for all car makers, repelling attempts by German producers "to create conditions that are more favorable to their own industry, at the expense of others," he said.

Marchionne has long accused rival Volkswagen AG <VOWG_p.DE> of contributing to a "bloodbath" among carmakers by waging a price war in Europe and ramping up production at a time when the continent faces huge overcapacity.


Fiat, which has been managing Chrysler since a 2009 U.S. government-led bankruptcy restructuring, owns 61.8 percent of the U.S. group.

In the past three years, Chrysler's turnaround has made it the biggest income generator for the combined group, contributing more than two-thirds of total profit.

Fiat expects to lose 700 million euros ($907.37 million) in Europe this year, and Marchionne is under pressure in Italy to explain how it can keep its factories there open when car sales in the country have plunged to their lowest level in 40 years.

Fiat has effectively abandoned plans to pour 16 billion euros ($20.6 billion) into its Italian factories, putting investments on hold until it sees signs of a market rebound. It has also idled production lines in Italy and left workers at home on reduced pay for extended periods to keep a lid on costs.

Unions and analysts have said that it was difficult to see how Marchionne could make those plants, currently running at around 50 percent capacity, produce cars for the U.S. market if he keeps delaying investments.

No details about models, production volume or the time frame for the export plan have been provided by the company.

"The feeling is that the wait-and-see attitude will lead to Fiat losing market share," said a union source attending a meeting with the government on Tuesday evening.

Unions are particularly worried about Mirafiori, Fiat's flagship Turin plant, where they say a promised 1 billion-euro investment is on hold despite plans to build a small Fiat-branded sports utility vehicle (SUV) at the end of 2013 and a small Jeep SUV in the second quarter of 2014.

Worried about possible job losses at Fiat's plants, the Italian government is considering tax or other incentives to help exports, Industry Minister Corrado Passera said on Monday. But Rome is already struggling to cut public spending in the face of the debt crisis, and its room for manoeuvre is limited.

In his speech, intended to rally staff in Italy behind him, Marchionne said he was aware that his frequent trips to the United States might have created fear among Fiat's 20,000 Italian employees that they were being "abandoned."

He said his commitment toward Fiat remained unchanged, and told local staff to ignore critics who have accused the company of disengaging from its home country. His words were at times almost bitter.

"Sometimes I have asked myself if it's worth it. I have asked myself if it makes sense to do things for a country that does not appreciate them, hopes that a foreign investor will do a miracle and paints us as incompetent exploiters," he said.

(Reporting by Silvia Aloisi and Jennifer Clark in Milan and Alberto Sisto in Rome; editing by Pravin Char and Matthew Lewis)