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December 20, 2012 5:16 pm
Sergio Marchionne, Fiat chief executive, sought to put behind him months of deteriorating relations with Italy by announcing plans to invest more than €1bn to build two higher end sport-utility vehicles at an Italian factory and end the carmaker’s losses in Europe.
In a meeting heavy with political symbolism, the event in Italy’s impoverished Basilicata region was also attended by Mario Monti, Italy’s technocratic prime minister, who said the investment at Melfi plant signalled “a rebirth of relations between Fiat and Italy”.
“Ours is a courageous plan. Today’s event is the first concrete step in that plan. It wasn’t an easy decision to make in a market in free fall,” Mr Marchionne said.
The European auto market is expected to record a nearly two-decade low this year and analysts say investment in premium brands may be the only way for the region’s carmaker to revive their businesses. The announcement follows months of acrimonious exchanges between Fiat, Italian unions and the business establishment over the future of the carmaker, historically Italy’s largest private employer.
The meeting also came as Mr Monti was expected to announce at the weekend he intended to run for political office in national elections in February. Mr Marchionne, an outspoken supporter of the former economics professor, had suspended investment in Italy under former prime minister Silvio Berlusconi amid concerns about political risk.
Fiat said the first of the two new models would be a Jeep utility vehicle that represented that brand’s entrance into a new market segment. Melfi will be the only plant to produce this model and it will be sold worldwide.
The factory will also produce the new Fiat 500X, the latest addition to the 500 family that is larger than the 500L launched three months ago. Total production capacity will be 1,600 vehicles a day. Once the plant upgrades are complete, Melfi will be able to produce up to four models on the same assembly line.
The announcement of the models is in line with comments by Mr Marchionne made at the end of October that he intends to focus on the premium segment to try to resuscitate Fiat’s fortunes.
Fiat’s European operations are expected to record a loss of €700m this year amid a plunge in car sales, which forced the carmaker to cut its 2014 trading profit forecast by a third to €5.2bn.
Mr Marchionne intends to introduce 19 vehicle models in Italy over the next four years, including nine of premium brand Alfa Romeo and six Maseratis. He aims to hit break-even in the region in the next three to four years.
Responding to Mr Monti’s expression of hope that Fiat’s pledge to invest in Melfi would extend to other plants in Italy, Mr Marchionne said: “What we are doing today represents the commitment we have decided to take, to find new solutions, to stay in Italy and to return to profitability. Fiat has said it expected to be at full capacity in Italy within the next four years.
Also at the event, John Elkann, Fiat chairman, addressed concerns among Italians that the alliance with Chrysler “took something from Italy”. “This shows the opposite. Without this alliance, the investment in Melfi would not have been possible,” he said.
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