Chrysler’s production of a fuel-efficient engine for inclusion in the Fiat 500 minicar at its Dundee plant in Michigan was recognised on Monday as meeting one of the three key performance targets outlined in the company’s operating agreement with the Italian carmaker. As a consequence Fiat has now increased its ownership in Chrysler to 25%. Plans to distribute the vehicle to South America could soon mean it meets the second.
As part of the agreement drawn up in June 2009 when Chrysler Group emerged from government-backed bankruptcy and Fiat took a controlling 20% stake in it, the US carmaker had to issue a commitment letter to the US Treasury. In the letter it stated that it had received the appropriate governmental approvals and would begin commercial production of Fiat’s Fully Integrated Robotized Engine (FIRE) – so-called because it is constructed by robot assembly to reduce costs – at the Dundee plant.
Production of the 1.4-litre FIRE began there last November and the first North American application is in the new Fiat 500 being produced exclusively at Chrysler’s plant in Toluca, Mexico. The company plans to start distributing it soon across the US and to South America.
Details on the number of 500 minicar vehicles to be moved have not been revealed but the inclusion of the South American market is significant.
A company spokesperson told Automotive Logistics News:“The vehicle will be shipped to South America, especially Brazil, which was one of the key reasons to produce in Mexico–to take advantage of the free trade agreement Mexico has with North America and Latin America.”
The movement of the vehicle to South America suggests that Chrysler is quickly targeting its second performance-related milestone – namely to generate revenue and sales growth outside of the NAFTA region with access to Fiat’s global distribution network.
Fiat has the opportunity to further increase its ownership in Chrysler to 35%, in 5% increments by meeting that performance target and another one that stipulates commercial production in the US of a 40-mile-per-gallon vehicle based on Fiat platform technology
Currently, now that Fiat has increased its stake to 25%, the UAW’s Voluntary Employee Beneficiary Association owns a 63.5% stake while the US Treasury owns 9.2% and the Canadian government 2.3%.