Italian group Fiat will invest over €1 billion in the production of two models of compact SUVs at a plant in Italy, in an effort to increase the use of production capacity and reduce the losses in Europe.
“It is not an hazardous strategy. We decided to shift away from mass carmaking and compete in the upscale market,”
said Chief Executive Officer Sergio Marchionne today at the plant in Melfi, southern Italy.
Marchionne wants to increase production of expensive models to recover Fiat’s operations in Europe, where the estimated loss is €700 million for this year. By 2016, Marchionne plans to introduce 19 models produced in Italy, including 9 Alfa Romeo cars and 6 Maserati models. Fiat will increase its production in Europe for Fiat and Chrysler cars to 2 million units per year by 2016, from 1.25 million units this year.
Marchionne said Thursday that he wants the losses in Europe to be eliminated in the next three to four years and operations in Italy to reach full capacity by then. The plan for Italy, which states that 15% of production will be for export could cost about €3 billion per year by 2014.
One of the compact SUVs will carry the Fiat logo, and the other will be a model of the Jeep division of Chrysler. Assembly operations at Melfi plant will begin in 2014.
Fiat negotiates tax incentives with the government led by Prime Minister Mario Monti so that vehicles intended for export, including the U.S., will have competitive prices.
Fiat is not the only car manufacturer which focus on making vehicles for the upper segment of the market. Demand in this segment is typically more resilient in times of economic crisis, unless lower-cost models. Renault plans to revive Alpine sports car brand, while PSA Peugeot will extend its Citroën DS Line.
Fiat announced this month that it intends to cut 1,500 jobs in Poland, to reduce production. Last year, Fiat has transferred production of the new Panda from Poland to Italy.
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