December 13, 2018 / 12:16 PM / a month ago

Fiat Chrysler may review $5.7 billion plan if Italy taxes diesel, petrol cars

MILAN (Reuters) - Fiat Chrysler (FCA) could review its 5 billion euro ($5.7 billion) Italian investment plan, which includes a shift to cleaner engines, if Rome raises taxes on petrol and diesel cars.

FILE PHOTO: A Fiat 500 is seen in front of the ancient Colosseum in Rome, Italy, May 28, 2017. Picture taken on May 28, 2017. REUTERS/Stefano Rellandini/File Photo

“Were these measures to be confirmed as of 2019, a thorough examination of their impact and an update to plans already announced would be necessary,” FCA’s (FCHA.MI) Europe head, Pietro Gorlier, said in a letter to government representatives in the northern Piedmont region, where some of the new investment would be targeted.

In an amendment to the 2019 budget law passed in Italy’s lower house last week, the government approved subsidies of up to 6,000 euros for lower emission vehicles, but included a surcharge of up to 3,000 euros on petrol and diesel cars.

However, the government immediately vowed to change it in the Senate, where it will be voted on next, after one of the ruling parties contested the measure.

Italy’s ruling parties - the anti-establishment 5-Star Movement and the right-wing League - have been at odds over the issue, with the latter opposing any new taxes on cars, while the pro-environment 5-Star has encouraged the new rules.

Unions and auto sector associations have also warned about the proposed new tax, saying it would hurt not only the carmakers but also the entire supply chain and could cost jobs.

FCA said last month it plans to spend more than 5 billion euros on new models and cleaner engines in Italy over the next three years to boost jobs and profitability.

5-Star leader Luigi Di Maio has since said the government would seek to improve the measures to not harm families in difficulties and to not create a shock to the Italian economy.

“We will find a solution ... without damaging or causing a shock to companies’ industrial plans,” Di Maio said when asked about Gorlier’s letter.

Possible changes to the amendment could result in the exclusion of smaller-engine vehicles from the proposed tax, government officials have said.

“The sector scenario has been significantly modified by interventions in the car market under discussion in the budget law, which in our opinion alter the whole framework within which we outlined our plan for Italy,” FCA’s Gorlier said.

“At the moment we do not yet have visibility on what the regulatory scenario will be in the coming years,” he added.

Reporting by Agnieszka Flak and Alberto Sisto; Editing by Alexander Smith

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