Details are still unclear at this point, but chinacartimes.com writes that the local manufacturer is still expecting government approval to go further with the alliance. However, it is only a matter of time, the source wrote, as the Italians are willing to invest a lot of money into Guangzhou, a move that would please the government, especially in such a difficult market environment.
As part of the agreement, Fiat and Guangzhou plan to produce around 140,000 cars and 220,000 engines per year. Although it was initially thought that the two partners would build cars in Guangzhou's facilities, it might seem like they now intend to set up a new factory that would become operations by 2011. The joint venture is worth 4.3 billion yuan ($630 million), the two companies said in a release rolled out in May.
China has become one of the major markets for Fiat - just like for many other automakers out there, including here Volkswagen, GM or Chrysler - so such a move pretty much makes sense. The most attractive thing in China is probably the reduced labor costs - take for example General Motors who recently announced its plans to transfer a part of the US production in China and sell those models overseas.
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