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Fiat Plans Second Plant in China as It Cuts Spending in Europe

September 13, 2012

Fiat SpA (F) is considering a second auto factory in China to expand in the world’s largest car market as it cuts investment in crisis-hit Europe.

“In the future, we might have another manufacturing site, somewhere in the south,” said Jack Cheng, general manager of Fiat’s joint venture in China with Guangzhou Automobile Group Co. (2238), said yesterday in an interview in Shanghai.

Fiat Chief Executive Officer Sergio Marchionne wants to boost sales in China to counter losses in Europe. The Turin, Italy-based manufacturer is reducing spending in its home region this year by 500 million euros ($645 million) to conserve cash, with demand in Europe poised to fall for a fifth straight year. Fiat’s mass-market brands lost 354 million euros in the region in the first half.

Marchionne, 60, who has been spearheading an industrywide effort to close excess assembly lines in Europe, has vowed to shut a second Italian factory unless he finds a way to export cars to the U.S. Fiat will present a plan to stem losses in Europe at the end of October.

After two failed partnerships in China, the Italian manufacturer will finally start sales of its first China-made vehicle, the Viaggio compact, on Sept. 16. Fiat plans to release one new model a year in the country and will introduce a sport utility vehicle in 2014, Cheng said yesterday.

Duty Dodge

The Viaggio will be available from 108,800 yuan ($17,188), according to Jiang Ping, executive deputy general manager of the joint venture, GAC Fiat Automobile Co. The venture’s factory can produce as many as 140,000 cars annually. The company also sells three imported models in China -- the Bravo hatchback, the Freemont SUV and the retro-styled 500 subcompact.

Fiat is playing catch up in China, where it terminated partnerships with Nanjing Automobile Group Corp. and Chery Automobile Co. The tie-up with Guangzhou Auto allows Fiat to produce cars locally and avoid paying the 25 percent duty on imports, making its cars more competitive.

GAC Fiat Automobile Co. targets 100 dealerships in a few weeks, up from 88 now, Robert Graczyk, commerce director at the company, said in Shanghai yesterday.

Last year, the Italian brand sold 991 vehicles in China, compared with 2.55 million units for General Motors Co. (GM:US) and 2.26 million at Volkswagen AG. (VOW)

China’s passenger-vehicle sales growth will probably accelerate in the second half, rising 15 percent to 8.48 million units, driven by demand from first-time buyers and a resurgent economy, the China Association of Automobile Manufacturers said in July. Full-year deliveries may increase 11 percent to 16.1 million vehicles, the association said.

“This market is still growing at 10 percent,” said Graczyk. “There’s a lot of opportunity.”

To contact Bloomberg News staff for this story: Tommaso Ebhardt in Milan at; Alexandra Ho in Shanghai at

To contact the editors responsible for this story: Neil Denslow at; Young-Sam Cho at; Chad Thomas at

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