TURIN -- Fiat S.p.A. plans to concentrate global production of the next-generation 500 minicar in Poland, ending output of the model for North American markets at Chrysler's Mexico plant by 2015, three sources told Automotive News Europe.
The move provides additional work for Fiat's top-ranked Tychy factory, which has struggled since the automaker shifted production of the Panda minicar to Italy.
The new-generation 500 is due in 2015 and will be sold worldwide, the sources said.
Fiat and Chrysler spokesmen declined to comment on future 500 production.
Cost savings
Despite being almost identical in styling, the European and North American 500s are structurally very different.
Building a new 500 with global specifications in one plant will permit Fiat to avoid duplicating engineering and tooling costs it incurred with the current generation car.
Fiat invested 300 million euros to launch the European 500. Chrysler, which builds the North American 500 under license from Fiat, invested $550 million to add 120,000 units a year of capacity for the North American variant in Toluca, according to media reports.
"A single production site looks like a logical move when making the next 500 a global model," said Massimo Vecchio, a financial analyst at Mediobanca Securities in Milan.
Boost for Tychy
Building the next 500 only in Poland will help Fiat increase capacity utilization at Tychy in southern Poland, as well as free capacity in Toluca for Chrysler's core products for the North American market, Vecchio said.
The Tychy plant is suffering from Europe's five-year slump in car sales and even more so from losing production of the Fiat Panda, which has been Europe's top-selling minicar since 2004.
In early 2011, Fiat decided to produce the third-generation Panda in Pomigliano d'Arco, southern Italy, to protect jobs in its home country.
Last year, Tychy still built a stripped down version of the previous-generation model, called the Panda Classic, but production of that car stopped in December. Declining sales of the other three models built in Tychy, the 500, Lancia Ypsilon and Ford Ka, forced Fiat to reduce production to two shifts from three and lay off 1,450 of the plant's 4,900 workers.
Tough decision
Production at the Tychy plant peaked at 605,797 units in 2009 but declined to about 300,000 units last year. Production is expected to decrease to just 250,000 units this year.
Job cuts in Tychy, a plant that achieved gold standards in the Fiat World Class Manufacturing system, were painful for Fiat-Chrysler CEO Sergio Marchionne. "We had to make a choice about how to balance the allocation of the remaining volumes across the large manufacturing footprint that Fiat has," he said earlier this month at an event in Turin. Marchionne admitted that moving the Panda from Tychy to Pomigliano was not a "rational decision" and that it was made to protect jobs in Italy, where labor costs are higher.
Mediobanca's Vecchio said making Tychy the global hub for the 500's production could be a way to effectively increase the plant's utilization even though a European market recovery is not foreseen for years.
Full capacity
At the Detroit auto show in January, Marchionne said that Chrysler's North American manufacturing footprint was nearing its full capacity. He also confirmed that Chrysler plans to build about 2.8 million units globally in 2014, up from 2.4 million last year. Marchionne added that before opening any new plant in North America, he wants to meet demand for Fiat-Chrysler vehicles by fully utilizing capacity at Fiat's European plants.
The Chrysler Toluca plant currently makes the Fiat 500 and the Dodge Journey mid-sized crossover. The Toluca-built Journey is also sold as the Fiat Freemont in Europe, South America and China.
Last year Toluca built 82,000 Fiat 500s and 179,000 Journeys/Freemonts, according to Chrysler data.
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