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Fiat Will Invest 3 Billion Reais for New Factory in Brazil

Fiat SpA CEO Sergio Marchionne
Sergio Marchionne, chief executive officer of Fiat SpA. Photographer: Giuseppe Aresu/Bloomberg

Fiat SpA, the Italian carmaker which runs Chrysler Group LLC, will invest 3 billion reais ($1.77 billion) to build a car factory in Brazil as it seeks to boost sales in the company’s second-biggest market.

“Brazil, where we expect to sell more than 1 million cars per year by 2014, is strategic to our expansion,” Chief Executive Officer Sergio Marchionne said in a statement today. The new plant in the state of Pernambuco will have annual production capacity of 200,000 units and will make vehicles for Latin American markets, Fiat said.

Brazil accounted for 18 percent of Fiat’s 50 billion euros ($66.9 billion) in revenue in 2009, more than any country except Italy. Fiat is focusing on emerging markets such as Brazil to increase revenue and counter a slump in European sales.

Fiat aims to increase Brazilian vehicle deliveries to more than 1 million in 2014 from 737,000 in 2009, with average annual growth of 6.5 percent, the Italian company said in April. Fiat had 22.7 percent of the Brazil car market last month, down from 25 percent a year earlier, according to the National Vehicle Manufacturer’s Association in Sao Paulo.

“We expect a positive contribution from Brazil, a market which is growing healthily,” Fiat sales chief Andrea Formica said Dec. 2, commenting on the outlook for next year.

Uno Compact

Fiat started selling its new Uno compact in Brazil during the second quarter. It delivered 63,400 of the cars through the end of September, the automaker said in October.

Fiat in October led a seventh consecutive monthly drop in European car sales. The carmaker’s deliveries in the region plunged 33 percent in October, according to the European Automobile Manufacturers Association.

The investment announced today is part of a 10 billion-reais plan for Brazil through 2014. The new plant may create as many as 3,500 jobs, Fiat said.

Fiat, which acquired a 20 percent stake in Auburn Hills, Michigan-based Chrysler last year, has said it will raise the holding to 35 percent by the end of next year. Marchionne plans to take the U.S. automaker public in the second half of 2011.

The Italian carmaker is spinning off truck and tractor divisions to focus on carmaking. The carving out of operations including Iveco and CNH Global NV into Fiat Industrial SpA will give Marchionne two entities to facilitate future alliances.

Fiat Industrial’s shares are scheduled to begin trading in Milan Jan. 3. The Italian Stock Exchange approved the listing today.

Download: Marchionne Says Chrysler May Repay U.S. and Canada Early

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