Ford and Fiat to Partner on New Small Cars in Europe

9 September 2005

Ending speculation about Fiat’s new partner, the company and Ford have signed a Memorandum of Understanding for the joint development of a future small cars in Europe.

The two new vehicles that would be involved, with highly differentiated designs, would be a new Fiat 500 and a replacement for the current Ford Ka.

Cost reduction in development and manufacturing is a major motivator for this deal, and reflects the increasing trend for automakers to look to countries with lower labor costs for producing small, low-margin cars. Fiat has already said that the new 500 (Cinquecento), due in 2007, will likely be built in the Polish plant that already makes the Panda and the 600.

PSA Peugeot Citroen and Toyota partner on small cars produced in the Czech Republic, VW imports the Fox from Brazil, and GM build its small Chevrolets in Korea (GM-Daewoo).

It also reflects ongoing strength in market for small cars in Europe—and the growing sense that rising fuel prices will put more focus on the sector.