Fiat re-enters China; sets up JV with Guangzhou Automobile

After its failure to grab General Motor's troubled Opel unit, Italian car major Fiat SpA has joined hands with Chinese state owned Guangzhou Automobile Group to make cars and engines for the Chinese market at Changsha, in Hunan province.

The joint venture was signed in Rome, just before the start of the G-8 summit, by Zhang Fangyou, the Guangzhou Automobile chairman, and Fiat chief Sergio Marchionne, the company said in a statement on Monday.

The cost of the project is estimated at $556 million, with production set to begin by the end of 2011.

The Italian car maker said the 50:50 joint venture project is eligible to receive support from the Chinese government under a new development plan to promote investment in six central China provinces.

Fiat also signed an additional seven deals worth $225 million with Chinese auto parts manufacturers.

During the first phase, the venture will have an yearly capacity to make 140,000 cars and 220,000 engines, which could eventually be increased to 250,000 cars and 300,000 engines a year.