ROME (AP) -- Fiat plans to increase its car production in Italy to up to 1 million vehicles over the next three years, but is going ahead with a contested plan to shut down a factory in Sicily, the company's chief said Tuesday.
The Turin-based auto empire will restructure its industrial network to increase production from this year's 650,000 to a range between 800,000 and 1 million, Fiat CEO Sergio Marchionne said at a meeting with government and union officials.
Marchionne is trying to return the Italian automaker to profitability in the face of plummeting consumer demand for new cars and is steering the reorganization of Chrysler LCC, which Fiat took over in June after it emerged from bankruptcy protection.
The government has been urging Fiat to increase production in Italy. On Tuesday, Marchionne said Fiat would spend €8 billion ($11.42 billion) in investments and R&D over the next two years, two-thirds of them in Italy.
He said that under the restructuring plan, a Fiat factory in Turin would produce two Chrysler models by 2012.
But he also insisted the company would go ahead with plans to shut down auto production at Termini Imerese, in Sicily, because costs at the plant are too high due to lack of infrastructure in the area. He said cars coming out of the factory cost up to euro1,000 ($1,400) more than those from other plants.
Car production there will shut down next year and Fiat is open to proposals from authorities on how to reconvert the plant, he said.
"For years we have taken upon ourselves to operate the Termini Imerese plant at a loss," Marchionne said in a presentation prepared for the meeting. "Today we can no longer afford it."
The government and Fiat have been at odds over the closure.
Economic Development Minister Claudio Scajola, who has criticized Marchionne for the plan, said in statement after Tuesday's meeting that he "appreciated" the pledge to increase production, but insisted that the Termini Imerese plant "must be preserved."
Workers demonstrated in front of Premier Silvio Berlusconi's office, where the talks took place, and union leaders announced more protests.
During the meeting, Marchionne also reiterated his request for the government to continue Italy's cash-for-clunkers incentives beyond the end of the year.
He said demand in Italy, which is forecast to remain roughly stable, would plummet if there is no extension on incentives to encourage drivers of older, more polluting cars to scrap them in favor of newer models.