Picture: SUPPLIED
Picture: SUPPLIED

Milan — Fiat Chrysler will spend more than €5bn on the car maker’s factories in Italy, shoring up its struggling European business by focusing on more in-demand sport utility vehicles and electric cars.

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

The increased outlay to the end of 2021 will finance Fiat’s plan to build a compact Alfa Romeo SUV at the Pomigliano plant, hometown of Italy's 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.

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% of Fiat’s average €8.7bn global expenditures on product overhauls and electric cars to Italy.

Pietro Gorlier, COO of Fiat’s business in Europe, said the plan included 13 new or restyled models.

The Italian-American car maker’s plans for Italy come as the company grapples with an increasingly lopsided business that saw North America account for about 97% of profit during the third quarter. Earlier this week, GM said it was 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.

It is likely that a similarly drastic solution from the country’s biggest manufacturer would have triggered opposition from labour unions and Italy’s populist government at a time when it is trying to fulfil its programme 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 labour 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% in the year through October in Europe, contrasting with a decline of 2% for the group.

The car maker’s shares rose as much as 1.7% in Milan but then trimmed the gains to 0.6% at 1.35pm.

Bloomberg