01.09.2011 MIRAFIORI UNDER THREAT AGAIN AS SUV LIFELINE UNRAVELS

JEEP COMPASS 2011

The deal to build a new generation of SUV, to be shared equally by Jeep - to replace the Compass (above) and Patriot - and Alfa Romeo, came in mid-January after a long and bruising battle with unions to make sweeping changes to working practices before Fiat management would make a commitment to the future of the threatened plant.

The lifeline for the future of Fiat's giant hometown plant, Mirafiori, have been thrown into disarray once again with news that the hard-fought deal to build a new-generation of SUVs at the plant now hangs under a cloud. Newswires, including Bloomberg and WSJ, quoted "a person familiar with the matter" saying that currency exchange rates could scupper the deal.

The deal to build a new generation of SUV, to be shared equally by Jeep (to replace the Compass/Patriot) and Alfa Romeo, came in mid-January after a long and bruising battle with unions to make sweeping changes to working practices before Fiat management would make a commitment to the future of the threatened plant. At present, production at the vast Turin plant is just a trickle.

In the end, after much negotiation, a slender majority of staff (54.1 percent) voted to accept the company's terms and Fiat unveiled bold plans to build 280,000 vehicles a year, safeguarding the plant's future with a 1 bllion euro investment - although no visible progress has been made on the plans in the intervening six months.

This week, however, Fiat has indicated that, with most of these new SUVs (a 'soft-roader' to be based on the C-Evo Wide architecture) likely destined for North America, the recent strength of the euro to the dollar has now cast doubt on the viability of the plan. There may well though be more to the story than just currency exchange rates, as the fluctuations currently being experienced by major global currencies mean it is virtually impossible to predict the financial landscape by the time these new SUVs reach production.

Some 280,000 SUVs a year was always an ambitious target, especially as it was claimed half of these would be accounted for by Alfa Romeo. This would have been an impressive achievement for a brand that completely missed the SUV boom and currently has a cloudy future. It was, and remains, a challenging task to hook buyers into the concept of an Alfa-badged SUV.

With that in mind, a 50-50 split of the 280,000 unit projection was always a remote possibility. It is thus logical that Jeep would take the greater proportion if the two models wind up being built Stateside. Fiat has consistently claimed that Alfa Romeo will relaunch in the U.S., with the latest proposed date now 2013. If this occurs - and it is a big if - an Alfa-badged SUV might wind up finding favour with buyers in North America. However, Jeep's next-generation Compass/Patriot is expected to account for most of its sales in its home market, and with the off-road brand significantly less-well-regarded in Europe than at home, it stands to reason that such a competitively-priced model be built in the NAFTA region

Meanwhile, this week's news raises another big question-mark over the historic Turinese plant's long-cloudy future. The same reports this week suggest a 'subcompact' car could be built at the plant instead, taking the place of the SUVs. However, with Fiat's record at delivering on promises, let alone speculation, there is a good chance this is likely to be 'official spin' to accompany the softening-up of the bombshell news which could ultimately prove to be a fatal blow to the plant.

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