MUMBAI – Despite Fiat Auto SpA’s latest restructuring plan calling for cutbacks and plant closings, the financially troubled parent is infusing its struggling Indian operation with additional capital and renewed efforts to instill confidence in dealers, vendors and customers.

New Palio diesel is helping prop up Fiat India’s sales.

Fiat India says it will do this by bringing in new models, cutting costs and reviving sales. The new infusion of cash will help wipe out its accumulated losses to give it a fresh start, says Alberto Montanari, Fiat India’s managing director. (See related story: Fiat Cutting 12,300 Jobs as Part of Latest Turnaround Plan)

He says the company should be able to break even on its investment of Rs2,000 ($425 million) by next year and turn profitable by 2005. “During my recent Italy visit, it has been decided to bring in fresh money into India,” he tells the media here.

With fresh capital, Fiat India will have a positive net worth and, therefore, will be protected from the list of potentially sick companies under India’s Board for Industrial and Financial Reconstruction. (See related story: Fiat India Trudges Toward Recovery Again)

The auto maker plans to sell 42,000 cars this year against 32,000 sold here last year. A spokesman declines to disclose the amount of its accumulated losses, but says Fiat India is targeting a 33% rise in turnover to $340 million for 2003.

Sales recently picked up following the launch of a diesel-powered Palio four months ago, and an upgraded gasoline variant is expected this month.

Meanwhile, the company is restructuring its operations for increased efficiency, including possibly shifting its production from the Kurla plant in Mumbai to its underutilized greenfield plant at Ranjangaon. The shift would cut production costs and earn tax benefits. As a result, Fiat India would be able to cut car prices by $600-$800.

The auto maker also is preparing a blueprint for enlarging the Ranjangaon operation. The new Fiat Research and Development Center may be located there. And Fiat is considering making the facility an export center for supplying right-hand-drive compact cars to neighboring countries such as Sri Lanka, Indonesia, Singapore, Bangladesh and Nepal.

But solutions to Fiat India’s current problems are complicated. Dealers are overstocked with gasoline-powered Palios, despite efforts to sell the cars at a considerable discount. The Kurla plant still has more than 5,000 cars parked in its lots.

Plus, the latest announcement of the parent company’s financial woes has dealers here jittery and their customers wondering if support of spare parts and services will continue.

Although most of the global plants to which Fiat India was supplying components have been closed, there may be some good news. Reportedly, Fiat Auto alliance partner General Motors Corp. is sending teams from Singapore and Australia to evaluate Fiat India’s plants for possible synergies with their operations.