Report – Fiat SpA plans to invest $12 billion to stem its revival image

According to two people familiar with the matter, the Italian Group plans to invest as much as 9 billion euros ($12.3 billion) on new models to end European losses in three years and revive nearly empty Italian factories.

The people, who asked not to be identified because the discussions are private, said that in addition to bolstering the upscale Maserati and Alfa Romeo with new “Made in Italy” models, the carmaker would focus the Fiat line on variants of the trendy 500 subcompact and the budget-oriented Panda small car, ditching a former best seller – the Punto.

“It’s a brave and historic move to abandon your roots,” said Roberto Verganti, a management professor at Milan Polytechnic and the author of the 2009 book “Design-Driven Innovation.” “Going upscale with cool, high-margin 500 and Alfa models is the only possible strategy to continue building cars in Italy.”

With the timing of Fiat’s sought-after merger with Chrysler uncertain, Sergio Marchionne, who is chief executive officer of both carmakers, is under pressure to stem the Italian manufacturer’s losses in Europe. While Fiat has previously said it aims to develop about 20 new models for Europe by 2016, including eight Alfa Romeos, the company has declined to comment on a revised European strategy until April.

As part of the luxury focus for Italy, Fiat will introduce 500 and Jeep sport-utility vehicles next year as well as a convertible version of the Alfa Romeo 4C sports car, said the people. Those cars will all be made in its home country. The new Alfa Romeo Giulia sedan, designed mainly for export outside Europe, will be built in Italy by 2016, they said.

The Fiat Punto will be replaced by a five-door version of the 500. That mass-market model will be built in Poland to save costs and boost profit margins, the people said. A Fiat representative declined to comment on the company’s European strategy.

Via Bloomberg