Fiat bravely banks on luxury brands

Fiat is expanding its European business, and focusing on Fiat 500 sales. Photo / Supplied

While European competitors close factories and get government bailouts, Italian carmaker Fiat is banking on its under-exposed luxury brands to put idle Italian car plants to work and stem losses in its European operations.

Fiat chief executive Sergio Marchionne announced an ambitious four-year plan to ramp up production of Alfa Romeo and Maserati brands in Italy, where Fiat will launch 17 new models to be built in its five local plants from 2013-2016.

Fiat, which owns US carmaker Chrysler, will also unveil a new smaller Jeep for production in Italy aimed primarily at Europe, and focus the Fiat brand on the 500 and Panda compact car ranges.

"This is truly not for the faint-hearted," Marchionne said. "We have not shied away from a fight."

The investments are part of capital expenditures of €16 billion to €18 billion ($25-$28 billion) in 2013-2014 across the Fiat-Chrysler alliance.

Marchionne believes they could "provide a permanent solution" for the quandary facing his under-used European plants, which are running below 50 per cent capacity.

Under the plan, Fiat Europe, which lost €238 million in the third quarter alone, would break even by 2015-2016.

Fiat's move is the latest response by European carmakers to the fifth consecutive year of declining car demand.

Ford Europe announced its response last week, saying it would close factories in Belgium and Britain that will put some 6200 European workers out of a job and take out 18 per cent of its European capacity.

The French Government has offered €7 billion in aid to PSA Peugeot, the No 2 carmaker in Europe, to try to stave off 9500 layoffs.

Marchionne, who has advocated the European Union come up with a roadmap for co-ordinated plant closures to better control the impact, said he felt Fiat had "already given" by closing a Sicilian plant that took 100,000 cars out of the carmaker's European capacity.

"In the case of Fiat, it would have relegated us to be a minor player in the European market because of the social consequences," said Marchionne.

The CEO also lowered his previous goal for Fiat and Chrysler to produce 6 million cars combined by 2014 to 4.6 million to 4.8 million a year. Fiat along with Chrysler expects to produce 4.2 million cars this year.

-AAP