Prototypes of the new B-segment car have been seen out testing on the roads for more than six months with the 319 million euro project now at an advanced stage.

Fiat's Termini Imerese plant on Sicily has been reprieved from the threat of closure after the European Union (EU) today granted the Italian carmaker 46 million euros of regional aid to invest in the development of the next generation Lancia Ypsilon. Termini Imerse has had the axe hanging over it for some years but the EU grant recognises the island's low standard of living and high level of unemployment and the severe impact the closure of the plant would have on the Sicilian economy.

With the current Ypsilon having been launched in 2003 and a mild facelift having arrived in 2006, Lancia will be replacing its key model when the next generation version arrives in the showroom next year. Prototypes of the new B-segment car have been seen out testing on the roads for more than six months with the 319 million euro project now at an advanced stage. The new Ypsilon will be based on the forthcoming Fiat 500 Giardiniera platform with a 240cm wheelbase and the usual option of the 1.3 Multijet 16v turbodiesel or 1.4 petrol engines. Unlike the current 3-door model it will only be available with 5-doors, while the rear ones will feature hidden door handles. Similar in size to current model, but slightly sportier in appearance, the design is the in-house work of Centro Stile Lancia.

"The European Commission has authorised, under EC Treaty state aid rules, 46 million euros of regional investment aid, which the Italian authorities intend to grant to Fiat for an investment project for the production of a new car model in Sicily," read a statement issued by the EU today. "The project involves investments to extend the existing Fiat plant in Termini Imerese in order to change the production process and to diversify its production. The investment is expected to maintain existing jobs in the region. The Commission found the measure to be compatible with the requirements of the Regional Aid Guidelines 2007-2013 and in particular with the rules on large investment projects, because Fiat would not increase significantly its production capacity. Therefore the positive impact of this investment on regional development can be considered to outweigh potential distortions of competition."

Competition Commissioner Neelie Kroes said this morning in a statement: “In these difficult times, maintaining existing jobs is of utmost importance. This investment project is expected to do so in Sicily without unduly distorting competition."

"The Italian authorities intend to grant to Fiat 46 million euros regional aid for a total investment project amounting to €319 million," the EU statement continued. "Fiat intends to produce with this investment project in Termini Imerese a new passenger car under the Lancia brand which is to replace the existing Lancia small car model Ypsilon. The project includes the extension of the existing plant and a significant change in the production process. The project is to be carried out in Sicily, in Southern Italy, an area eligible for regional aid as a region with an abnormally low standard of living and high unemployment. The aid is granted under an existing aid scheme but, due to the high amount of aid and investment costs involved, the measure had to be notified to the Commission for individual assessment and clearance. The Commission has assessed Fiat's position on the relevant car market segments and found that Fiat's market share and capacity increase resulting from this project would remain below the thresholds provided by the Regional Aid Guidelines," the statement concluded.