Fiat plans to make one million cars a year in Italy

Nearly 650,000 Fiat vehicles were made in Italy in 2009

Fiat has unveiled plans to increase annual car production in Italy to one million over the next three years.

But it will still go ahead with plans to shut down the smallest of its five Italian factories based in Sicily.

The announcements were made by Fiat chief executive Sergio Marchionne after a meeting with government and union officials in Rome.

Fiat also said it would spend 8bn euros (£7bn;£$11bn) in investments and research over the next two years.

Two-thirds of that investment will be in Italy.

Increased production

The Turin-based carmaker produced nearly 650,000 vehicles in the country in 2009, and the Italian government has been urging Fiat to increase production.

Mr Marchionne said that within a company restructuring plan a Fiat factory in Turin would produce two Chrysler models by 2012. The Fiat chief has been running Chrysler since June.

He also hinted that the production of the Fiat Panda could be transferred to its Pomigliano factory in Southern Italy.

But he confirmed that the unit in Sicily's Termini Imerese would shut down at the end of 2011.

Mr Marchionne said cars coming out of the plant cost up to 1,000 euros more than those from other factories due to the lack of infrastructure in the area.

A demonstration by workers took place outside the meeting.