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Fiat Said to Start Italy Spending Amid Monti Resignation

Fiat SpA Chief Executive Officer Sergio Marchionne may start his new investment plan for Italy as soon as next week in the southern town of Melfi, three people familiar with direct knowledge of the matter said.

Marchionne will probably give details then on the initial spending at the Melfi plant to build Jeep and Fiat sport-utility vehicles, said the people, who asked not to be identified because the plans have not been revealed yet.

The carmaker, which controls Chrysler Group LLC, will go ahead with the projects outlined in October even with possible political instability in Italy after Prime Minister Mario Monti announced his intention last weekend to resign, the people said. A spokesman at Turin-based Fiat (F) declined to comment.

“Marchionne is making a brave choice at the right moment,” said Wolfram Mrowetz, chairman of Milan brokerage Alisei Sim.

Marchionne plans to boost sales of more expensive models to turn around Fiat’s European operations, which are forecast to post 700 million euros ($913 million) in losses this year and led the manufacturer to cut its 2014 trading-profit goal by 31 percent to 5.2 billion euros. The CEO intends to introduce 19 models through 2016 that will be produced in Italy, including nine Alfa Romeo-badged vehicles and six Maseratis.

Model Strategy

Of the new vehicles, 15 will be made for both export outside the region and sale in Europe. Fiat and Auburn Hills, Michigan-based Chrysler plan to invest as much as 18 billion euros in the next two years, mainly to develop new models in Europe, according to an Oct. 30 investor presentation. Fiat predicts it will break even in Europe in 2015 at the earliest as it adopts the higher-priced vehicle strategy.

“Marchionne is doing well in taking this opportunity, and his focus on the high-end market segment goes in the right direction,” said Carlo Scarpa, professor of industrial economy at the University of Brescia. “A new government wouldn’t make a big difference and, in the medium term, the economic trend should be positive.”

Fiat was unchanged at 3.58 euros at 5:08 p.m. in Milan after rising as much as 1.2 percent. The stock has gained 1.1 percent this year, valuing the company at 4.49 billion euros.

Monti said today that he’s concerned by the crisis in carmaking in Europe and its effects on industry in his country. The region’s auto-manufacturing association expects a fifth annual decline in sales this year.

‘Not Inevitable’

The Italian industry has particularly suffered “from the slow and inevitable erosion of competitiveness that has been underestimated for a long time,” Monti said in a speech at the annual meeting of the Italian carmakers lobby Anfia in Rome. “Let me correct myself: it’s not inevitable. It can and must be reversed.”

The prime minister intends to resign as soon as next week, when Parliament is expected to pass his 2013 budget. Monti announced he would step aside after Silvio Berlusconi’s People of Liberty party withdrew its support when the former three-time premier said he would run again. Once Monti resigns, Parliament will be dissolved, with elections held as soon as February.

Fiat said Dec. 7 that it plans to eliminate 1,500 jobs in Poland to reduce production as the European auto market is on track to hit a 17-year low in 2012. The carmaker, which last year moved production of the new Panda model from Poland to its home market, doesn’t plan to cut more jobs in Italy after shutting a plant on the island of Sicily in 2011.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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