July 18, 2008 / 12:56 PM / 12 years ago

Fiat, Cummins end engine joint venture

MILAN (Reuters) - Fiat FIA.MI has ended a diesel engine joint venture between its Iveco and CNH units and U.S. company Cummins (CMI.N), which began in 1996 with an investment of over $300 million, the companies said on Friday.

As a result, Fiat’s engine development division, Fiat PowerTrain, will take full control of the European Engine Alliance (EEA), in which Cummins had a one-third stake.

In return, Cummins will take heavy plant maker CNH’s 50 percent stake in Consolidated Diesel Corporation (CDC) which was set up in 1980, giving it full control of the unit.

Iveco is Fiat’s truck making unit.

Fiat has already started substituting CDC’s engines, Alfredo Altavilla, the chief executive of Fiat PowerTrain, said in the statement.

“This transaction enables CNH and Iveco to ... further leverage ... key technology developments particularly towards overcoming the challenges of increasing engine emission regulations and attention on fuel consumption,” Altavilla said.

The break-up of the ventures comes as many car makers — Fiat included — are forging alliances to share production and other costs in the highly competitive sector.

Vehicle makers are feeling the squeeze of current financial market turmoil, which has hit sales and prompted consumers to delay or drop purchases.

In addition, high fuel prices are pushing buyers to switch to smaller, more fuel-efficient vehicles while increasing concerns over pollution are leading to more restrictive regulations on emissions.

Fiat shares were up 2.49 percent to 10.40 euros by 1241 GMT. The DJ Stoxx index of auto shares .SXAP was up 2.33 percent.

Writing by Jo Winterbottom; Editing by David Cowell

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