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TURIN -- Fiat is currently eyeing Mexico as the location for a plant that would supply both North and South America, people familiar to the matter told Automotive News Europe this week.

To cope with the weak dollar, Fiat needs production in North America after its Alfa Romeo brand returns in the U.S. in late 2009.

At the same time, demand in South America is growing faster than Fiat capacity increases and the company said it needs more production for the region.

Mexico is strategically located to balance its output between Fiat's needs in North and South America.

Talking to financial analysts late last month, Fiat Group and Fiat Group Automobiles CEO Sergio Marchionne said the company needs additional capacity for South America.

"Where that capacity will come from is not yet decided. I think that it may be part of a North American solution, especially in terms of the introduction of the Alfa brand", Marchionne said.

Fiat earlier this year said it was scouting for a plant to build Alfa Romeo cars in the United States. The company planned to choose a location by the end of May.

Two possibilities were being considered, sources familiar with the project said at the time: Buying a shuttered factory formerly owned by one of the Detroit 3. Or Fiat could expand an existing Case New Holland agricultural machinery or construction equipment plant. Fiat owns Case New Holland, which operates 11 plants in North America.