Fiat Says Decision ‘Not Even Close’ on Canada Investment

Chrysler Group LLC, the automaker exploring where to build its new minivans, may decide whether to move forward by the end of March, Chief Executive Officer Sergio Marchionne said.

Chrysler, fully owned by Fiat SpA (F) since last month, is negotiating with federal and provincial governments in Canada for loans to help it prepare factories in Windsor and Brampton, Ontario. Fiat is “not even close” to resolving those talks, Marchionne said yesterday.

The investment, which Marchionne says may total billions of dollars, would be the largest Fiat has made since Chrysler exited bankruptcy in 2009.

“We’ve got to decide whether you want this or not,” Marchionne told reporters in Toronto. “And if you do, I’ll be more than willing to stay. Global footprints are global footprints. I’m not using this as a threat, but there are some parts of the world that are desperately looking for capacity utilization, where infrastructure exists, is in place and is operational.”

Marchionne said he has heard from other jurisdictions including the U.S. and Mexico about moving the production. They’re likely to offer better incentives than Canada, he said.

The company’s two minivans, the Chrysler Town & Country and the Dodge Caravan, were the second and third best-selling minivans in the U.S. last year, trailing the Honda Odyssey, according to Autodata Corp. They are built at a Windsor factory.

Global Scale

Marchionne, 61, wants to transform Fiat and Chrysler into a company with the scale to challenge larger global automakers such as General Motors Co. (GM) and Volkswagen AG. Acquiring Chrysler was a step toward that goal, Marchionne has said.

“The world is getting incredibly competitive and the walls are porous,” Marchionne said yesterday, who also praised the skill of the workers in Windsor. “I think it’s important that we preserve this manufacturing know-how in the country and that we defend it. How we defend it is something that needs to be determined with Fiat Chrysler and the government and we’re in the process of doing that.”

The incentives for the minivan plants are reported to be as much as C$700 million ($637 million), the Globe and Mail said this week.

Canada said Feb. 11 it is increasing funding for automakers by C$500 million to attract more investment from companies such as Chrysler as output declined amid global competition.

The government will bolster its Automotive Innovation Fund over two years, adding to the C$316 million invested in six projects since 2008, according to the budget released by Finance Minister Jim Flaherty.

Beyond Chrysler

The money “is not just for Chrysler, it’s for some of the other automotive companies in Canada,” Flaherty said, adding he considers the industry an employment hub. “The demands by Chrysler are substantial.”

Ford Motor Co. will build the new Edge utility vehicle at the automaker’s Oakville plant, near Toronto, to be exported to more than 60 countries, according to a statement yesterday. The Dearborn, Michigan-based company has spent C$700 million to revamp the facility. Prime Minister Stephen Harper’s government will contribute as much as C$71.6 million to the Oakville project, according to a statement last year.

This week Chrysler paid $5 billion to a United Auto Workers trust, reimbursing it for a note the trust provided five years ago as part of the automaker’s financial rescue. The payment completes the final obligations the company owed as a result of its bankruptcy.

Politics, Noise

Last month, Fiat bought the 41.5 percent Chrysler stake held by the UAW trust, which was created to pay medical bills for union retirees. The acquisition gave Fiat full control of the U.S. business and created the world’s seventh-largest auto manufacturer.

Fiat, which owned 58.5 percent of Chrysler prior to the full takeover, relies on the U.S. for profit because of losses in Europe amid a six-year car-market contraction in the region.

Fiat plans to move its primary listing to New York by Oct. 1 and rename itself Fiat Chrysler Automobiles NV. The manufacturer will also continue to have shares traded on the Milan exchange.

What hasn’t been decided is where to make its next minivans, the CEO said.

“We’re trying to remove all politics and noise around this issue,” Marchionne said yesterday. “It’s a very simple investment call. We’re ready to go. We’re at the table. The car is ready. We’re ready to build minivans. Somewhere.”

To contact the reporter on this story: Mark Clothier in Toronto at mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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