Fears are growing that Fiat will close its plant in Mirafiori, Italy, near Turin, Automotive News Europe reported.

Fiat pulled production of the two key new models from Mirafiori - the Punto and an unnamed model that will result from the New Large project. Both new vehicles are set to appear in the fourth quarter of 2005.

The struggling Italian carmaker told its unions that the Cassino plant in southern Italy will get the New Large project, which will lead to production of a lower-luxury model to replace the Fiat Croma.

Meanwhile Fiat's Italian plants in Melfi and Termini Imerese will produce the third-generation Punto. Termini Imerese, which is on the island of Sicily, was chosen ahead of Mirafiori due to political reasons.

The plant, which faces obvious logistical problems due to its location, was scheduled to close when production of the current Punto ended in 2005.

However, Sicilian authorities pressed the Italian government to save the Fiat plant, which is the biggest industrial operation on the island.

Mirafiori will become the company's minivan manufacturing centre, handling production of four minivans by 2006.

The plant will also continue building three premium low-volume vehicles that won't be replaced: the Alfa Romeo 166, and the Lancia Lybra and Thesis. The trio accounted for 33,016 units in 2002.

Fiat told the unions that Mirafiori will maintain its 1,000-units-a-day output for the foreseeable future, but the unions fear the plant will no longer be competitive if it produces 220,000 units a year when it has capacity for 550,000 units.

Mirafiori built more than 500,000 units a year up until 1997, but production dropped to 280,000 units last year. The plant also lost production of the Panda last month, its biggest volume model.

The plant's new volume model will be the Fiat Idea. Fiat wants to build 100,000 units of the compact minivan next year and increase that to 140,000 units by 2005, when a Lancia version will reach full capacity.

The Cassino plant, which produces the Stilo, was awarded production of the New Large project because the plant is operating at less than half of its 400,000-unit-a-year capacity. Fiat built just 187,610 Stilos last year and in the first nine months of 2003 output was 122,270 units, a 15% drop compared to the same period last year, Automotive News Europe said.