Fiat to Sell Sicily Plant to Indian Automakers

The Indians have decided to make another important step in their attempt to get a strong foothold into the European market, as two Indian automakers, Tata Motors and Mahindra & Mahindra are interested in taking over Fiat's S.p.A.'s factory in Termini Imerese, Italy, according to a local newspaper.

Both companies are holding separate negotiations with the Italian automaker, India's Business Standard said, quoting unnamed senior officials accompanying Italy's minister for economic development, Claudio Scajola, who is on a visit to India.

After saying that he was not aware of the negotiations, Scajola added: "Indian investors, including Tata Motors and M&M are welcome in Italy."

As you may remember, Sergio Marchionne, CEO of carmakers Fiat and Chrysler Group, presented the Italian government a restructuring plan of the production in Italy, in an attempt to secure tax breaks for new cars. The proposal included stopping production at the Termini Imerese plant in Sicilly by 2011.

Though closing the plant was criticized by Industry Minister Claudio Scajola, he admitted in a letter sent to Il Giornale newspaper that building cars in Sicily is more expensive. Each car built there costs Fiat 1,000 Euros more due to the island’s weak infrastructure. "Termini Imerese is too small, there are no economies of scale, it's inconvenient for suppliers and it's inconvenient for Fiat," said Pierluigi Bellini, a director at IHS Global Insight.

As the Fiat Group is trying to cut unnecessary costs to handle the on going recession, an Indian buyer would be a solution as good as any.