Fiat to Spend More Than $5.7 Billion to Revamp Italy Production

(Bloomberg) -- Fiat Chrysler Automobiles NV will spend more than 5 billion euros ($5.7 billion) on the carmaker’s factories in Italy, shoring up its struggling European business by focusing on more in-demand sport utility vehicles and electric cars.

The manufacturer’s Italian sites for years have struggled to run at full capacity, raising costs. By keeping the factories open and rejigging their output the carmaker may avoid similar political backlash to what General Motors Co. is facing after deciding to close several North American plants.

The increased outlay through 2021 will finance Fiat’s plan to build a compact Alfa Romeo SUV at the Pomigliano plant, hometown of Italy Deputy Premier Luigi Di Maio, and a battery-powered Fiat 500 in Turin’s Mirafiori factory, the company said in a statement, confirming an earlier Bloomberg News story.

Fiat to Spend More Than $5.7 Billion to Revamp Italy Production

In addition, a second model under the Jeep brand will be manufactured in southern Italy to tap into burgeoning demand for SUVs. The investment will allocate more than 11 percent of Fiat’s average 8.7 billion-euro global expenditures on product overhauls and electric cars to Italy.

Pietro Gorlier, chief operating officer of Fiat’s business in Europe, said the plan includes 13 new or restyled models.

The Italian-American carmaker’s plans for Italy come as the company grapples with an increasingly lopsided business that saw North America account for some 97 percent of profit during the third quarter. Earlier this week, General Motors said it’s shuttering seven factories globally and shedding more than 14,000 jobs to cut unprofitable models and juggle unprecedented spending on new technologies with an uncertain payoff.

That’s prompted days of Twitter attacks by U.S. President Donald Trump, who denounced GM and asked federal agencies to cut subsidies to the carmaker.

If Fiat were to propose massive job cuts and plant closures in Italy, it probably would trigger opposition from labor unions and the country’s populist government at a time when it’s trying to fulfill a program of boosting jobs and economic growth.

“While the automotive world is shaken by the news of the GM job cuts and the rising difficulties provoked by the challenges car producers are facing with the technological shift to electric, we are particularly struck by Fiat’s commitment,” Roberto Di Maulo, head of the Fismic labor union, told reporters in Turin on Thursday.

Fiat will keep all Italian factories open, people familiar with the plan said earlier. A third pillar of Fiat’s plan adds the compact Jeep Compass SUV to be made alongside the Renegade and the Fiat 500X in Melfi, southern Italy. Deliveries for the brand surged 61 percent in the year through October in Europe, contrasting with a decline of 2 percent for the group.

The carmaker’s shares rose as much as 1.7 percent in Milan but then trimmed the gains to 0.6 percent at 1:35 p.m.

©2018 Bloomberg L.P.