TURIN, Italy (Reuters) – Fiat Chrysler plans to spend more than 5 billion euros ($5.7 billion) on new models and engines in Italy over the next three years to try to make better use of factories and boost jobs and margins.
A Fiat Chrysler Automobiles (FCA) sign is seen at its U.S. headquarters in Auburn Hills, Michigan, U.S. May 25, 2018. REUTERS/Rebecca Cook/Files
The plans are intended to deliver on a strategy outlined by FCA’s late boss Sergio Marchionne in June, in which he made a commitment to keep converting Italian plants to churn out higher margin Alfa Romeos, Jeeps and Maseratis and hybrid and electric versions of its vehicles to protect jobs and lift profitability.
The company will launch a total of 13 new models or restylings of existing models in the 2019-2021 period and ensure that all plants in Italy reach full employment, FCA’s new European head Pietro Gorlier told unions and journalists in Fiat’s hometown of Turin on Thursday.
FCA appointed Gorlier last month to tackle a region where profitability is below that of rivals, thousands of workers are on temporary layoff schemes, and some plants run way below capacity.
FCA’s operating margin in Europe recovered to 3.2 percent last year, but this compares with rival carmaker PSA Group’s global automotive margin of 7.3 percent. FCA expects its margin to grow to between 5 and 7 percent by 2022.
A big part of the investments in Italy will focus on the development of electric and hybrid models and the creation of common platforms that can be used to develop different vehicles to boost efficiencies and flexibility, he added.
“These are investments that are capable of being implemented and kick off tomorrow morning,” Gorlier said, stressing that additional plans for Italy and other plants in Europe – in Poland, Serbia and Turkey – would be announced at a later stage.
A new Fiat 500 electric model will be produced at FCA’s Mirafiori plant in Turin, while its plant in Pomigliano, southern Italy, will churn out a mild-hybrid version of its popular Fiat Panda hatchback.
Pomigliano will also produce a new compact utility vehicle from the Alfa Romeo stable, while Melfi, which already produces the Jeep Renegade, will also make the Jeep Compass.
Its Cassino plant would get a re-styling of the Alfa Romeo Giulia and Stelvio models launched in recent years and the platform would also be used to produce a medium-size Maserati utility vehicle.
FCA also plans to expand production capacity at its Sevel joint venture with PSA Group, which assembles the Ducato light commercial vehicle, given healthy demand.
Union officials, who fretted when promises for full employment had slipped from 2015 to 2018 and then to 2022, welcomed the plans, especially the fact that they were being implemented immediately.
“We are very satisfied,” said Marco Bentivogli, secretary general at the FIM Cisl union. “We are talking about 5 billion euros out of a total five-year spend for EMEA of 8.7 billion euros… that’s an extraordinary concentration of new products.”
Gorlier said the investments were based on an outlook for the market seen as “substantially stable” in the coming years, even though a slight contraction is expected in 2020 given introduction of stricter emissions regulations.
He said a previously announced target to discontinue production of diesel passenger cars in Europe by 2021 was “too aggressive” and the company would keep producing diesel models beyond that date. But he confirmed the overall trend towards a gradual shift away from diesel remained.
($1 = 0.8790 euros)
Reporting by Agnieszka Flak and Gianni Montani. Editing by Jane Merriman