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  DR Motor assembles the DR1,based on the Chery M1, in a plant north of Naples.
 
Italian dealer's plan to build rebadged Chery cars in Fiat factory faces hurdles
Luca Ciferri | 2011/12/6

TURIN -- A Fiat assembly plant in Sicily could be used to assemble cars shipped from China for sale in Europe if car dealer Massimo di Risio's plans become a reality.

But his goal to sell up to 65,000 rebadged cars from Chery Automobile Co. annually faces hurdles.

Di Risio is set to buy a factory in Termini Imerese, Sicily, from Fiat for a token sum of 1 euro.

Helped by large government incentives, di Risio's DR Motor Co. aims to reopen the factory, which Fiat closed on Nov. 24.

Di Risio plans to convert the facility into a CKD plant that would assemble four different Chery models. The plant would start production late next year, initially for the Italian market with exports to other European countries starting in 2013.

A former race-car driver, di Risio, 51, opened his first car dealership for the Lancia brand in 1983. DR Automobiles Groupe now sells 22 brands. In 2009, the company sold 6,200 new cars.

Di Risio has long had ambitions beyond selling cars. In 2006, he opened a facility to assemble rebadged Chery Tiggos from semi knocked-down kits in Macchia d'Isernia, about 100 km north of Naples.

He launched the compact SUV under his own "DR" brand in Italy and named it the DR5.

Di Risio aims to compete with brands such as Kia, Chevrolet, Hyundai and Nissan. He describes DR Motor as Italy's second-largest carmaker after Fiat, but the company has not met early sales goals and has experienced financial difficulties.

Initially, DR aimed to sell 12,000 units in Italy during the company's first year of operation and expand into other European markets. But the DR5, which starts at 13,880 euros (118,800 yuan) in Italy, did not win the hearts of Italian buyers.

Nor did two other models: the DR1, a rebadged Chery M1 minicar, which starts at 68,300 yuan and the DR2, a rebadged Chery A1 subcompact whose price starts at 76,900 yuan.

Sales peaked at 5,000 units in 2010, far short of the company's target. This year, the company expects to sell 3,000 units.

Fragile finances

Di Risio has struggled to overcome financial problems.

At the end of 2009, DR's net assets were less than 86 million yuan, while its net debts totaled 291 million yuan.

That same year, DR generated revenues of 402 million yuan and net earnings of only 299,000 yuan, the first profit since the company was founded in 2006.

Dealers complain they have customer orders, but vehicle deliveries have been erratic. Truck drivers have told dealers there are 500 to 600 vehicles from China at the Italian port of Livorno, awaiting shipment to the dealerships.

Earlier this week, unions complained that workers in DR's Macchia d'Isernia plant have not yet received their salaries for September and October.

Di Risio, who declined to be interviewed for this story, downplayed his company's problems. He told an Italian newspaper that a turnaround plan prepared by Ernst & Young is under review by creditor banks and that there has been only a short delay in salary payments.

State aid

Di Risio was scheduled to sign an agreement with Fiat and the Italian government on December 1 to take over the Termini Imerese plant.

The factory was opened in 1970 to produce the original Fiat 500, and most recently it built the Lancia Ypsilon three-door hatchback.

Fiat says it closed the Termini plant because the lack of suppliers in Sicily added 6,000 to 8,600 yuan in logistics costs per vehicle.

DR plans to assemble 60,000 units a year in Termini, while its plant in Macchia would continue making 5,000 to 6,000 DR1 minicars a year.

Di Risio is counting on hefty incentives to take over the Termini site on January 1. He plans to invest 941 million yuan for r&d and tooling and another 128 million yuan to retrain workers.


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