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Fiat has confirmed the first stage of its new plan for its Europe, Middle East, and Africa (EMEA) region, announcing that two new small sport utility vehicles will be built at its Melfi site in Italy.
IHS Automotive perspective
Fiat has confirmed that two new small sport utility vehicles will be built at its Melfi site in Italy following the investment of more than EUR1 billion (USD1.3 billion).
This is the first investment that will be made as part of the automaker's renewed strategy for its Europe, Middle East, and Africa (EMEA) operations, which will focus on building more premium and higher-margin vehicles in Italy.
It remains to be seen where the Punto – which accounts for the majority of the Melfi site's output – will now be built and whether Fiat's plans will be sufficient to bring about the considerable improvement required.
Fiat has announced that it will manufacture two new small sport utility vehicles (SUVs) at its Melfi facility in Italy. The announcement was made yesterday (20 December) at a meeting attended by Fiat chairman John Elkann, chief executive officer (CEO) Sergio Marchionne, and Italian prime minister Mario Monti. In a statement, the automaker said that in order to bring the vehicles built under the Fiat and Jeep brands to the factory, the site will benefit from an investment of EUR1 billion (USD1.3 billion). This will result in it becoming "one of the most advanced car assembly plants in the world, equipped with the very latest technologies and managed according to [Fiat's] World Class Manufacturing standards". According to the automaker, the plan includes modifications to existing production processes to accommodate its new modular Small Wide platform – set to be one of Fiat-Chrysler's three principal architectures – which can be easily adapted to produce even larger vehicles. Planned investments will also include technological upgrades in all areas of the plant, including a new metrologically equipped stamping shop, new panel and body welding lines with 500 new welding robots, and a revamped paintshop featuring the latest technologies. The assembly area will also benefit from "major upgrades with completely new equipment that will enhance work station ergonomics and logistics flows". The automaker said that once the upgrades, already started, are completed by 2014, the Melfi plant will have increased flexibility, with the ability to produce four different models on the same production line. Total production capability based on three shifts is expected to eventually stand at 1,600 vehicles per day.
Following the announcement, the Financial Times quotes Prime Minister Monti as saying that the investment in the Melfi site signals "a rebirth of relations between Fiat and Italy". Marchionne added that, "Ours is a courageous plan. Today's event is the first concrete step in that plan. It wasn't an easy decision to make in a market in free fall." He went on: "What we are doing today represents the commitment we have decided to take, to find new solutions, to stay in Italy and to return to profitability." Also at the event, Elkann addressed concerns among Italians that the alliance with Chrysler "took something from Italy", stating, "This shows the opposite. Without this alliance, the investment in Melfi would not have been possible."
Outlook and implications
The announcement marks the beginning of the first investment that will be made as part of Fiat's renewed strategy for its Europe, Middle East, and Africa (EMEA) operation that was announced in late October. Under this new plan put together with an eye to returning to profitability, improving utilisation levels, and reducing its dependency on the European market, the company plans to focus more of its attention on building more premium and niche vehicles in Italy, which have greater margins. As part of this plan, of the 33 new vehicles to be launched between 2013 and 2016, 17 will be built in Italy, and of these 8 will be Alfa Romeos and 6 will be Maseratis. The Jeep will also fall into this category and will be the vehicle that was previously expected to be produced at the Mirafiori (Italy) site alongside its Fiat-badged sibling, the 500X. The importance of exports to its strategy, which will hopefully be underpinned by support from the Italian government (see Italy: 15 October 2012: Fiat, unions begin collective bargaining talks; Italian government begins export support study), is underlined by the fact that the company noted in its statement that the platform that is being used by these vehicles already complies with US regulatory standards and as a result would face no requirement for further modifications.
Despite this announcement, there remain questions to be answered about the Fiat plan. Among them are whether other vehicles will be built at the Melfi site and what they will be. At present, the site manufactures the B-segment Fiat Punto as its sole model, which in the past has seen annual production levels around the 200,000-unit mark, but which had reached 350,000 units per annum at its peak. However, under this new plan, IHS Automotive believes that production of the Punto could leave the site, which will not have the capacity to produce such a vehicle at the required levels now that these SUVs are being brought in. Joining these two vehicles instead will be a new C-segment SUV model that will be sold by the Alfa Romeo brand. It remains to be seen whether the strategy for this plant and others in the country, such as Cassino and Mirafiori, is successful in helping Fiat improve from its current position.