Chrysler LLC is in talks with Fiat over the possibility of producing future Alfa Romeo models at one of its North American factories, the report building on recent news that the Italian firm was approaching the ‘big three’ US carmakers.

Chrysler LLC is in talks with Fiat over the possibility of producing future Alfa Romeo models at one of its North American factories, the report building on recent news that the Italian firm was approaching the ‘big three’ U.S. carmakers.

Tuesday’s story in the German newspaper Handelsblatt that Fiat is reportedly talking to Chrysler LLC comes after Fiat CEO Sergio Marchionne announced in an interview late last month that the company was seeking to build Alfa Romeo models in the region from 2011-12 onwards. As part of this, Marchionne had already spoken to all three major US carmaking groups: General Motors, Ford and Chrysler.

“Handelsblatt has learned Chrysler could produce the cars for Fiat subsidiary Alfa Romeo,” the newspaper stated in yesterday’s edition, adding that according to industry sources, the talks are moving forward.

Marchionne foresees a strategy which calls for the re-launch of the Alfa Romeo brand stateside next year following the arrival of a select number of the dramatic Alfa 8C Competizione sports cars this year. With the current weakness of the US dollar, importing Alfa Romeo models from Europe will not be profitable for Fiat, and he wishes to begin local manufacturing as soon as it becomes practical.

To achieve this Marchionne is targeting the plentiful spare capacity that all three of the big American brands currently have, and reopening a disused factory is one option being favourably considered.

Chrysler LLC is struggling more than its rivals, with sales continuing to contract as demand for its products weakens. The carmaker, which includes the Jeep and Dodge brands in its portfolio, saw an 80.1 pct stake purchased from German owners Daimler in 2007 by private equity firm Cerberus Capital Management. Daimler had bought Chrysler in 1998 and the resulting merger saw the formation of DaimlerChrysler. However Cerberus is generally regarded as having made a misjudgement in its acquisition and the firm has struggled to evolve any coherent strategy to take Chrysler forward. For Chrysler, any future deal with Fiat would help to ease its chronic overcapacity, which has grown further since the Cerberus takeover.

The news of talks with Fiat come within hours of Chrysler announcing a deal with Japanese carmaker Nissan. Nissan will manufacture an all-new, fuel-efficient small car based on a unique Chrysler concept and design. This new segment entry for Chrysler will be sold in North America, Europe and other global markets in 2010, and manufactured at Nissan’s Oppama Plant in Japan. Chrysler, meanwhile, will manufacture a full-size pickup for Nissan. Based on a unique Nissan design, this truck will be manufactured at Chrysler’s Saltillo (Mexico) Assembly Plant. In order to accommodate this product, Chrysler will shift volume from Mexico to its U.S.-based assembly plants that produce pickup trucks. Sales of the pickup in North America will start in 2011.