Fiat said on July 6 it had signed an agreement with the Chinese firm Guangzhou Automobile Industry Group (GAC) to build a factory in China.
The deal, signed in Rome during a visit of Chinese President Hu Jintao, calls for an investment of more than 400 million euros (US$556 million) to build a plant of more than 7.5 million square feet.
Fiat said the joint venture would produce engines and vehicles for the Chinese market, with production starting in the second half of 2011.
The facility will have an initial output capacity of 140,000 cars and 220,000 engines a year, with capacity potentially increasing to 250,000 vehicles and 300,000 engines a year.
"It's an important step with a strong partner in the process of Fiat's internationalization and technological development," said Fiat chairman Luca Cordero Montezemolo.
Fiat a month ago forged an alliance with Chrysler, taking a 20% stake in the U.S. auto manufacturer. This could rise progressively to 35% and Fiat could eventually take control of Chrysler.
Copyright Agence France-Presse, 2009