Fiat Automóveis is poised to switch part of its Palio model's production to its factory in Córdoba, Argentina as part of a new US$300 million investment in the plant which already assembles the hatchback's sister, the Siena saloon. Fiat Automóveis has established an agreement with Tata Motors for the local production of its Xenon pick-up, with an investment of US$80 million in Córdoba's facilities being made in order to produce 20,000 units a year.

Fiat Automóveis is poised to switch part of its Palio model's production to its factory in Córdoba, Argentina as part of a new US$300 million investment in the plant which already assembles the hatchback's sister, the Siena saloon. The Palio, which was comprehensively facelifted a year ago, is one of South America's best selling passenger cars and its latest version has given the range's sales a boost.

Of the new investment, US$200 million will be used to expand the production of engines and drivetrains at Córdoba, with the remaining US$100 million being earmarked for vehicle production. As many as 600 new jobs and 1,200 indirect jobs could be created by the new plans which will see the Córdoba factory rapidly becoming a key component in Fiat's Latin American operations.

The investment will help to increase the presence of Fiat in the Mercosul trading block, a regional common market that encompasses Uruguay, Argentine, Paraguay and Brazil. It will also open up more capacity at Fiat Automóveis' major unit at Betim in Brazil which is currently the sole home of the Palio, and which is currently operating right at its maximum annual production capacity of 700,000 units a year. The extra capacity is urgently required as the factory, located in the Minas Gerais region, will shortly be producing the new Linea 3-box saloon.

Fiat's factory in Argentina was closed and subsequently mothballed in 2002 during the last severe economic downturn in the country, and it demanded investments of US$60 million to be made for its reopening in December of last year. Presently its car production capacity is 50,000 units a year of the Siena model. The plant is also building gearboxes for PSA Peugeot-Citroen. Fiat Automóveis has also recently established an agreement with Indian automaker Tata Motors for the local production of its Xenon pick-up, with an investment of US$80 million in Córdoba's facilities now being made in order to produce 20,000 units a year of the model which will be released in Brazil, Argentina and other major Latin American countries in the second half of 2008.

Argentina also offers companies lower wage costs than Brazil and Fiat Automóveis isn't the only automaker to be eying up Argentina as a production base: during April car manufacturing in the country was up a massive 31.5 percent year-on-year.

by Claudio Perlini