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Chrysler Group to build Fiat 500 minicar at factory in Mexico

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DETROIT August 17, 2009; Tom Krisher writing for the AP reported that Chrysler Group LLC, now being run by Italian automaker Fiat Group SpA, is planning to build the Fiat 500 minicar at a factory in Mexico, according to a person briefed on the company's plans.

The automaker also is considering building a compact car in the U.S. that could be larger than the 500, according to the person, who did not want to be identified because the plans have not been made public.

Chrysler spokesman Gualberto Ranieri declined to comment Monday. But news of the Fiat 500 decision disappointed several members of the United Auto Workers union who had hoped that the minicar would be made at a U.S. factory because of UAW cost-saving concessions and the fact that Chrysler has received $15.5 billion in U.S. government aid.

It was not clear which Mexican factory would get the 500, but it likely would be a plant in Toluca that builds the PT Cruiser sedan and Dodge Journey crossover and employs more than 2,100 workers organized under a Mexican union. Chrysler also has a truck assembly plant in Saltillo, Mexico.

Even though the UAW has made concessions to reduce labor costs, workers still make far less per hour at Mexican factories. Since small cars generally fetch lower prices than larger vehicles, the profit margins are narrower, making low costs important. Also, Mexican factories are closer to Brazil, a key market for Fiat.

Turin-based Fiat's management is trying to turn Chrysler around. The Italian automaker took a 20 percent stake in Chrysler earlier this year as part of its exit from bankruptcy protection. The U.S. government owns an 8 percent stake in the Auburn Hills, Michigan-based Chrysler, which lost $8 billion last year.

Fiat, as part of its purchase, had announced plans to bring the hugely popular 500 to the U.S., along with the Alfa Romeo brand and Fiat-designed compact and midsize cars. The Italian automaker also plans to bring engines, transmissions and other technologies to Chrysler.

UAW members were hoping that Fiat would build the 500 at an assembly plant in Sterling Heights, Michigan, which is slated to close by the end of 2010.

"We want to keep as much work as we can in this country and in Michigan," said Bob Stuglin, president of a UAW local at the Sterling Heights parts stamping plant which is close to the assembly facility.

Stuglin, who said he had not been told of the decision by the company, said that UAW workers have given up a lot in an effort to keep work at their factories.

The Wall Street Journal reported Chrysler's decision on Monday.

Dan Strumpf writing for the AP in New York contributed to this report.