Fiat, GAC near deal on site for Jeep plant

Fiat S.p.A. and its Chinese partner are near a deal to begin producing Jeeps in China for the first time since 2006 after they compromised on the plant's location, said two people familiar with the negotiations.

Fiat, which had sought to make Jeeps near its own facilities in China, recently agreed to locate the factory near Guangzhou Automobile Group Co.'s home base in the Panyu district of Guangzhou, sources said.

The accord is still subject to final approval, one of the people said.

The agreement paves the way for Jeep's return to China, where it originally began production in 1983. Fiat CEO Sergio Marchionne is counting on Jeep to re-establish a niche in China after a stalled effort with the Fiat brand.

The Cherokee will probably be the first Jeep model built at the plant, one of the people said.

A spokesman for Guangzhou Auto declined to comment on a Jeep production site. Fiat, which is based in Turin, Italy, controls Chrysler Group LLC, which owns the Jeep brand.

Mike Manley, chief of Jeep, said in April that he expected Jeep production to start by the end of next year in Changsha, where Fiat makes the Viaggio sedan.

In January, Chrysler and its Chinese partner said they had reached a preliminary agreement to produce Jeep vehicles in China, but no details were disclosed at the time.

Because China charges a 25 percent import tariff on cars, local assembly would lower the price of the Jeep Grand Cherokee, which has a starting price of 579,900 yuan ($95,000) in China.

By contrast, the Grand Cherokee is priced at $28,995 in the United States.

The Chinese government requires overseas automakers to set up joint ventures with local carmakers to produce vehicles in China and avoid the tariff.

According to a posting on Guangzhou's municipal Web site, the central government approved a plan by GAC and Fiat to build a 4.7 billion yuan assembly plant with an initial production capacity of 60,000 units a year.

The Jeep brand is more recognizable than its Italian parent in China because it was the first Western badge built in the country. Jeep manufacturing in China ended a decade ago.

Fiat's Jeep push in China also underscores the Italian carmaker's growing dependence on its American unit to compete with larger manufacturers. General Motors and Volkswagen AG sell about 15 cars in China for every one that Fiat delivers.

Marchionne has been working to combine the two companies for four years to compete with the likes of VW, GM and Toyota Motor Corp.

Sales in Asia accounted for 4 percent of the 3.3 million vehicles Fiat and Chrysler delivered worldwide through September.

Source: China Automotive Information Net