Fiat Forms Joint Venture With China's GAC

ROME (AP) -- Fiat Group CEO Sergio Marchionne signed an agreement Monday with state-owned Guangzhou Automobile Group Co. to produce cars in a joint venture beginning in the second half of 2011 as Fiat seeks to expand its position in the growing Chinese market.

Marchionne signed the deal with GAC Group chairman Zhang Fangyou in the presence of Premier Silvio Berlusconi and Chinese President Hu Jintao, who were meeting ahead of the Group of Eight summit, which begins Wednesday in the central Italian city of L'Aquila.

The joint venture plans to produce the Linea sedan as well as two engines in a new 700,000-square meter plant to be built in Changsha, the capital of Hunan province and a major road and rail hub 600 kilometers (400 miles) north of Guangzhou, Fiat said in a statement.

Investment in the joint venture will be euro400 million ($556 million), Fiat said in a statement, noting that the industrial project is eligible to receive support from the Chinese government under a new development plan to promote investment in six central China provinces.

The plant initially will produce 140,000 cars and 220,000 engines a year, with the potential to increase to a maximum 250,000 cars and 300,000 engines a year, Fiat said.

Fiat has recently taken a 20-percent stake in the U.S. automaker Chrysler, as Marchionne seeks to create a global auto powerhouse.

Fiat and GAC have been collaborating since 1998 on technology for development of the first vehicle to be produced under the GAC brand.