Fiat and Chrysler plan JV for Alfa Romeo

The proposal marks the first significant step toward integration in Europe between the Italian and US automakers since Fiat took control of Chrysler with a 20-per cent stake in June 2009.

In the US, Fiat has launched the iconic, subcompact 500 and has started to build engines with Fiat technology at US plants.

Marchionne made the proposal during ongoing talks with Mirafiori unions seeking more flexible work rules, as Fiat is doing at all its Italian plants as a condition for €20 billion ($26.64 billion) investment to increase production at the underutilized factories.

Under the proposal, Fiat and Chrysler would invest a total €1 billion in the Mirafiori plant, proportional to the volumes produced by each brand. Mirafiori would produce up to 280,000 cars — including Jeep and Alfa Romeo brands — a year by 2012, more than half for export, especially to North America, Fiat said. That compares with 178,000 last year.

The Mirafiori plan would help Fiat reach a milestone to raise its share of Chrysler by providing a way to improve Chrysler sales internationally.