Fiat shakes up plants, Melfi to build new Punto

MILAN, Jan 22 (Reuters) - Fiat said on Thursday it would streamline production at its southern Italian plants from 2005 to save more money in its battle back from crisis.

Fiat said it would build the replacement for its top-selling Punto only at Melfi, a state-of-the-art factory where suppliers based on site are linked directly to the production line, allowing it to pump out cars more efficiently than older plants.

In October, Fiat had said the new Punto, due in 2005, would be produced in Melfi and Sicily's Termini Imerese plant.

Instead, Termini Imerese will now take over building the Lancia Ypsilon city car which is now pieced together at Melfi.

The switch will cost about 35 million euros ($44.28 million), Fiat said.

"(The plan) will allow us to cut costs and improve synergies with our suppliers...It is aimed at filling our production capacity and using our plants better," it said in a statement.

Fiat's core car factories are only working at about 70 percent capacity but, under a plan unveiled by its new management last year, that should rise to 78 percent by 2006.

Fiat confirmed that the Mirafiori plant in its home town of Turin would stop making the Punto and focus on top-range cars and multi-purpose vehicles like the lumpy Multipla and the smaller Fiat Idea which hits the showrooms this month.

That will help cut costs as Punto bodies currently have to be shipped to Turin from the cutting machines at Melfi, in the southern Italian region of Basilicata.

A slump in car sales and heavy debts dragged Fiat to its worst ever loss in 2002.

Chief Executive Giuseppe Morchio, who took the helm almost a year ago, reiterated on Thursday that Fiat should pull back to break even this year. Fiat Auto, which accounts for about 40 percent of group sales, is due to hit break even next year.