Fiat may shift Italy SUV production to US

Bloomberg News (Milan) - Fiat SpA (F), the Italian carmaker which controls Chrysler Group LLC, may shift planned production of Jeep and Alfa Romeo brand sport-utility vehicles from its oldest plant in Turin to North America and build a small city car at the factory instead, a person familiar with the matter said.

Fiat may assemble a yet-to-be built subcompact car at the Mirafiori plant after the strengthening euro against the dollar made the possibility of building SUVs mainly destined for the U.S. a less competitive option in Europe, said the person, who declined to be identified before an official announcement. A final decision hasn't been made, the person added.

Fiat last November announced a 1 billion-euro ($1.44 billion) investment to make as many as 280,000 Jeep and Alfa Romeo SUVs at the Mirafiori plant starting in the fourth quarter of 2012. The euro has gained about 9 percent against the dollar since then, raising the cost of building vehicles in Europe bound for the U.S. market.

"From a product-mix point of view, it makes a lot of sense," AT Kearney analyst Marco Santino said by phone. "The U.S. would keep know-how of SUV building, it would help the launch of Alfa Romeo in North America and it would be a more competitive product due to lower costs of production."

Shares Advance

Fiat rose 18 cents, or 4.3 percent, to 4.33 euros in Milan trading today. The shares have dropped 35 percent this year, valuing the company at 5.3 billion euros.

The automaker may discuss the small car in Turin tomorrow when Chief Executive Officer Sergio Marchionne hosts the first meeting of Fiat and Chrysler's single management team, the person said. A Fiat spokesman, who confirmed the meeting, declined to comment on the production plan. Fiat unions today asked for a meeting with the company to discuss the Mirafiori plant's future.

Fiat is planning models like the subcompact to turn around its European operations after posting losses in its biggest market and losing ground to competitors. Marchionne last month appointed purchasing chief Gianni Coda to run Fiat and Chrysler in the region. Coda starts his new job tomorrow.

Fiat's European market share shrank to 7.2 percent in the first half from 8.1 percent a year earlier as deliveries fell 13 percent to 530,228 vehicles. Fiat aims to recover market share in the second half with new models, including the Fiat Freemont, a European version of Chrysler's Dodge Journey SUV, and the Lancia Ypsilon subcompact.

Management Changes

Fiat said yesterday that sales chief Andrea Formica, who ran Toyota Motor Corp.'s sales in Europe before joining the Turin-based company in September 2010, resigned after less than a year and will be replaced by Lorenzo Sistino, head of the carmaker's light commercial-vehicle unit.

Marchionne, while confirming his commitment to invest at the Turin facility, told Piedmont Region President Roberto Cota Aug. 29 that he may change the production plans for the plant.

"Fiat is evaluating which model it will build at Mirafiori," Cota said after meeting the CEO.

The Italian carmaker plans to start production of a small city car in 2013, according to its 2010 business plan.

Italy's largest manufacturer is spending 20 billion euros in its home country through 2014 to improve factories and vehicle development in exchange for union concessions on work rules.

Referendum Win

Marchionne won workers' support for Mirafiori's investment plan in exchange for measures to limit strikes and curtail absenteeism in January as 54 percent of the plant's 5,500 workers approved the deal in a referendum, which was opposed by Fiat's biggest union.

The workforce at the 2 million-square-meter (494 acre) Mirafiori site, which was inaugurated in 1939 in the presence of fascist dictator Benito Mussolini, reached 50,000 in the 1970s. The number fell in subsequent decades as Fiat opened plants in the south and moved production abroad.

Fiat increased its Chrysler stake to 53.5 percent July 21. The Italian carmaker expects to hold 58.5 percent of the third- biggest U.S. automaker by the end of 2011, after getting 5 percent in return for developing a fuel-efficient car for Chrysler.