Fiat and Ford announced this morning that they have now signed a definitive agreement to co-operate on building a new generation of small cars. Finalising the agreement comes just two months after it was first revealed - to widespread surprise - that Fiat and Ford had signed a "memorandum of Understanding" to explore the idea of co-operation in this area.

The joint venture provides a significant boost and a genuine vote of confidence in Fiat's strategic and engineering abilities, as the new models will be based on the existing Panda's floorpan, fitted with Fiat mechanicals' and built at Fiat's factory at Tychy in Poland. The joint statement (issued in both Turin and Cologne this morning) revealed that the project is already underway, and it is being pitched towards an ambitious timetable: the two new cars are scheduled to arrive in the 2007-08 period. The apparent speed with which the project is set to be realised is down to Fiat CEO Sergio Marchionne, who has pushed forward every deadline since he took up the reigns and started to shake up Fiat Auto.

For Fiat the new car will mark the arrival of the much-anticipated new Fiat 500 model, an idea original glimpsed when the highly regarded Trepiuno concept car was presented in Geneva last year, while for Ford, it will replace the current Ka model range. Significant interior and exterior differences are promised to give each car distinct brand identity, while production is slated for 240,000 units per year, divided evenly between the two.

FIAT - FORD JOINT STATEMENT

The Automobile Sector of Fiat Group and Ford Motor Company announced today they have signed a definitive agreement to co-operate on the joint development and production of vehicles in the European small car (sub-B) segment. The outcome of this exciting project will be the delivery to market of two highly differentiated vehicles, small cars with exterior and interior design that are true to the individual parents' brand identities.

The two vehicles planned for development, the new Fiat 500 and a replacement for the current Ford Ka in Europe, will play a significant role in each company's European product range. Fiat and Ford are highly experienced in the development of successful small cars in Europe.
 

By working together, Fiat and Ford will benefit substantially from reduced development costs and economies of scale in manufacturing and component sourcing. The result will lead to better value and increased quality for customers, while retaining the brand characteristics of each vehicle. Fiat and Ford are already working jointly on the development of the new vehicles. The current Fiat Panda platform will be the basis for the development of the new cars, which will be manufactured in Fiat's existing Tychy facility in Poland, where Ford engineers will contribute to the development of their models. The vehicles will use Fiat powertrains built in Poland and Italy.

"The strategic cooperative agreement with Ford represents another milestone in our strategy that calls for targeted alliances aimed at sharing financial and industrial resources on new products and platforms," said Sergio Marchionne, CEO of Fiat Group and Fiat Auto. "It is consistent with successful ventures, established with major partners including PSA Peugeot Citroen and Suzuki, and current discussions with the Indian group Tata Motors." Marchionne added: "As far as Fiat is concerned, the partnership with Ford is relevant fourfold: the decision to manufacture the new cars at Tychy is a clear vote of confidence and trust in our Polish plant; the joint development of the new cars bears witness of the flexibility of the highly successful Fiat Panda platform; the alliance represents a win-win industrial opportunity to both parties. Finally, I am pleased to say that the much awaited future Fiat 500 will further enhance our brand identity as it represents both an icon in the history of our Company, and of the motor industry."

"We fully intend to replace the Ka with a similarly iconic model," said John Fleming, Ford of Europe President and CEO. "This vehicle will retain the fundamental character of the original and embody key elements of our new 'kinetic' design language. Styling for the Ka replacement will be led by Ford of Europe Executive Design Director Martin Smith. Fleming added: "Ford of Europe has amassed considerable expertise in the development of small cars, and is recognized for its class-leading driving dynamics. Fiat is the ideal partner for us in this particular project, as they are acknowledged as having been for many years one of the world's leading manufacturers of small cars. The decision to combine forces with Fiat in this highly competitive area gives us the opportunity to minimize unit costs, while developing highly competitive products which will be true to our respective brand values."

The new products will come to market in the 2007-08 period. The projected annual volume will be around 240,000 units, divided evenly.