Production of Alfa Romeo Giulietta Could Relocate to Illinois Chrysler Assembly Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Fiat SpA (PINK:FIATY) (Turin, Italy) has been in the process of rebuilding the Chrysler Group LLC (Auburn Hills, Michigan) since it began operating the American automaker in 2009. Fiat's management team has done an excellent job of bringing Chrysler back into the spotlight in North America, slowly building its sales and making the necessary changes and cuts to make Chrysler a viable automaker once again.

Along the way, Fiat has met the benchmarks that were required as part of Chrysler's bankruptcy agreement, which have allowed Fiat to slowly build its stake in the American automaker. One of the next mandated milestones is to produce a vehicle capable of reaching the vaunted 40-mile-per-gallon (mpg) level in America. To reach that goal, Fiat is considering relocating production of the Alfa Romeo Giulietta from Italy to Chrysler's assembly plant in Belvidere, Illinois, since the Giulietta is a model capable of the 40 mpg.

Fiat recently added the FIAT 500 to its North American lineup, another vehicle that can reach the 40 mpg level of efficiency, but that car is being assembled in Mexico and thus does not meet the requirement from the U.S. government to produce such a vehicle in the U.S. Once Fiat can get Chrysler assembling a 40-mpg vehicle in the U.S., then Fiat will be able to further increase its ownership in Chrysler. Reaching this benchmark, combined with completing the repayment of loans to the U.S. and Canadian governments, will give Fiat the ability to take its stake in Chrysler to more than 50%, exactly where Fiat's leadership has been aiming ever since it took control.

The Giulietta will be built on the same platform as the Jeep Compass and Jeep Patriot, two models currently being assembled at the Belvidere assembly plant. According to the word coming out of Italy, production of both the Compass and Patriot would relocate to Italy at the facility currently assembling the Giulietta. The Giulietta would provide both Fiat and Chrysler with a significant competitor in the luxury, mid-size performance vehicle market, with its prime competitors being the Audi A6 and the BMW 5 series. It would also give Chrysler its first true luxury vehicle in its lineup of cars and trucks.

Besides the swapping of models from Italy to the U.S., the Belvidere assembly plant is the most logical facility to assemble the Alfa Romeo should it make it across the pond. Belvidere is Chrysler's newest assembly plant in North America and is in the process of completing a $600 million expansion. The expansion involved adding a 683,000-square-foot body shop to the 4 million-square-foot facility, as well as significant equipment additions throughout the plant. As a result of the expansion and equipment additions, only minor retooling would be necessary to get the Belvidere plant ready to assemble the Alfa Romeo model, and that retooling could be handled rapidly with minimal additional cost to Chrysler. Dodge Caliber production would remain at the plant, unless Chrysler decides to stop production of the model.

The potential relocation of an Alfa Romeo model to the U.S. is exciting news for Chrysler. The automaker has been struggling for years to catch up to its major American competitors and grab a more significant portion of the lucrative North American market. Fiat has positioned Chrysler to be a significant force in the market in the coming years, and moves such as this one could help launch Chrysler to whole new levels of success. While the move would not occur until 2013, once Fiat's management makes the final decision to do it, it should be just the right time for Chrysler to break into the luxury vehicle market as current plans call for Chrysler to finish repaying its debt to the U.S. and Canadian governments in 2012 and launch its IPO. Everything has been moving in the right direction for America's No. 3 automaker, but the changes that have been made, and will continue to be made, could make it a much more significant player in the American market very soon.

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