Fiat 500 deal details

Allpar contributor James Hale illuminated the rationale behind making Fiat 500 cars in Mexico rather than at an American plant:

1. Mexico has free trade agreements with the USA and Canada (NAFTA), as well as with the European Union. This means that the country is uniquely positioned to manufacture European brands and export them to the USA. There are rules of how much content the products from from non-NAFTA zones, like Europe, can have, and there are legal ways around those rules as well. It wouldn’t be surprising to find that the 500 would have some sort of preferential tax treatment when it’s imported into the USA, assuming that NAFTA content wouldn’t be enough to have the car classified as a NAFTA product.

2. The $400 million came from a loan made by the Mexican government, as the company presented a plan that says that 1,300 new jobs will be created. Chrysler Toluca will provide 100,000 copies of the car, half of which will be exported to the USA and Canada, and the rest to other markets such as Brazil, with which Mexico has a car trade agreement (Mexico has some Brazilian models from GM and Ford for sale).

3. The money comes from two Mexican government-owned, government-run banks, Nacional Financiera or “National Financial Corp.”, and the Mexican Bank of Foreign Trade. Both entities were created to provide financing such as this. The Mexican government just loves to finance projects that will result in exports, such as this one.

4. Mr. Marcchione made himself available to sign this credit, along with Mexican President Calderón. A newspaper picture showed the latter going out of a Fiat 500; another shows President Calderón at the wheel of a red Fiat 500.

The Fiat 500 is expensive, fetching up to US$21,700 for their most expensive model. The entry-level car sells here for about US$18,200, an amount that could get you a bigger car.

 Like on Facebook