The automobile sector of Fiat Group and Ford Motor Company announced yesterday that they have signed a definitive agreement to cooperate on the joint development and production of vehicles in the European small car (sub-B) segment.

The outcome of this project will be the delivery to the European market of two highly differentiated vehicles; small cars with exterior and interior design that are true to the individual parents' brand identities.

The two vehicles planned for development, the new Fiat 500 and a replacement for the current Ford Ka, will play a significant role in each company's European product range. Fiat and Ford are highly experienced in the development of successful small cars in Europe. By working together, the two companies will benefit substantially from reduced development costs and economies of scale in manufacturing and component sourcing. The result will lead to better value and increased quality for customers, while retaining the brand characteristics of each vehicle.

Fiat and Ford are already working jointly on the development of the new vehicles. The current Fiat Panda platform will be the basis for the development of the new cars, which will be manufactured in Fiat's existing Tychy facility in Poland, where Ford engineers will contribute to the development of their models. The vehicles will use Fiat powertrains built in Poland and Italy.

"The strategic cooperative agreement with Ford represents another milestone in our strategy that calls for targeted alliances aimed at sharing financial and industrial resources on new products and platforms," said Sergio Marchionne, CEO of Fiat Group and Fiat Auto. "It is consistent with successful ventures established with major partners, including PSA Peugeot Citroën and Suzuki, and current discussions with the Indian group Tata Motors."

Marchionne added: "As far as Fiat is concerned, the partnership with Ford is relevant fourfold: the decision to manufacture the new cars at Tychy is a clear vote of confidence and trust in our Polish plant; the joint development of the new cars bears witness to the flexibility of the highly successful Fiat Panda platform; and the alliance represents a win-win industrial opportunity for both parties. Finally, I am pleased to say that the much awaited future Fiat 500 will further enhance our brand identity as it represents both an icon in the history of our Company, and of the motor industry."

"We fully intend to replace the Ka with a similarly iconic model," said John Fleming, Ford of Europe President and CEO. "Fiat is the ideal partner for us in this particular project, as they are acknowledged as having been for many years one of the world's leading manufacturers of small cars. The decision to combine forces with Fiat in this highly competitive area gives us the opportunity to minimise unit costs, while developing highly competitive products which will be true to our respective brand values."

The new products will go on sale in the 2007-08 period. Projected annual volume will be around 240,000 units, divided evenly.

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