Fiat-Chrysler to build 280,000 Fiat and Jeep small SUVs in I




Fiat Chrysler is betting on a breakneck expansion of its upmarket Alfa Romeo, Jeep and Maserati brands to transform itself into a global carmaking powerhouse within five years.

The Jeep Renegade, which debuted at the Geneva auto show on Tuesday, will be the first true test of the recent marriage between Italian carmaker Fiat and its U.S. unit Chrysler, meant to allow both to share technology, cash and dealer networks.

Fiat-Chrysler plans to build up to 280,000 small SUVs a year in Italy for the Fiat and Jeep brands, sources say. Production will start in June 2014 with the as-yet-unnamed Jeep variant followed three months later by the Fiat 500X.

The newly merged group outlined a long-awaited business plan on Tuesday, aiming to revive its historic carmaking names and persuade investors it can overcome high debt, an uncertain market and past missteps to close in on industry leaders such as Volkswagen AG (VOWG_p.DE) and Toyota Motor Corp .

Fiat Chrysler Automobiles' new small Jeep should help the carmaker reach an ambitious sales target of 1 million vehicles for the brand this year and will test the world's seventh-largest auto group's ability to compete globally.

The planned annual volume for the Jeep is up to 150,000 units while Fiat's version will account for 130,000, two suppliers involved in the project told Automotive New Europe.

"Today is much more than a new chapter. We are writing an entire new book," Chief Executive Sergio Marchionne told reporters and analysts during a day of presentations in Detroit.

Through the alliance, brands like Jeep hope to gain a global manufacturing footprint in Fiat's home turf in Europe and in fast-growing markets such as Brazil, which has long been one of Fiat's strongholds.

Fiat said last December that it would invest more than 1 billion euros ($1.3 billion) to add these small SUVs to its plant in Melfi, central Italy. The production plan is key to the automaker's bid to boost capacity usage and end losses in Europe by focusing on building higher-margin models.

Besides an aggressive, belated push into Asia, Marchionne promised to increase North American sales by half as Chrysler broadens its lineup and the embattled Dodge brand digs in.

"The investment that Fiat has already made, now gives the opportunity to Jeep to expand its manufacturing footprint at lightning speed," Mike Manley, head of the Jeep brand, said at the launch of the Renegade.

Fiat intends to introduce 19 Italy-produced models through 2016, including nine Alfa Romeo-badged vehicles and six Maseratis. The carmaker plans to increase production of Fiat and Chrysler cars in Europe to 2 million cars a year by 2016 up from a planned 1.2 million this year.

The carmaker kept its options open to finance the plan, but ruled out a capital increase or any divestment. He said one of the options was a mandatory convertible bond, but no decision has been made.

Even though analysts believe Jeep is the only truly global brand in FCA's portfolio, they are cautious about the 1 million target, a 37 percent jump from 2013.

Fiat-Chrysler CEO Sergio Marchionne believes that by using Fiat's Italian factories to export cars around the world the automaker's European operations will return to breakeven by 2015-2106. Troubles in Europe led the manufacturer to cut its 2014 trading-profit goal by 31 percent to 5.2 billion euros.

Fiat Chrysler said it would invest billions of dollars to build new models and ramp up output, predicting sales would surge to almost 7 million vehicles by 2018 from 4.4 million last year - a target some analysts thought highly ambitious.

"Even though sales in Europe will grow, it won't be easy to make huge volumes with Jeeps in the region because the market is very different from the U.S. one," said Andrea Giuricin, head of TRA Consulting. "Asia is still a big blind spot for Fiat, and they need to rapidly grow their market share there to be able to maximize on the potential of the Jeep brand."

The automaker's Europewide production plan, which will use 15 percent of Fiat's capacity in Italy, Poland, Turkey and Serbia for exports, is expected to cost about 3 billion euros a year through 2014, according to a chart shown during a presentation on the automaker's Web site last December.

"It's definitely a tall order, but I don't think we ever expected anything less from Marchionne in terms of the ambition," said Exane-BNP Paribas analyst Stuart Pearson.

The brand traces its roots to the iconic World War Two military vehicle and has had multiple owners over the past seven decades.

"Even getting half or two-thirds of the way to those business plan targets would be a positive achievement industrially - it's then a question of what investors are expecting and what's already priced into the shares."

While the Wrangler and Grand Cherokee models are the best-selling Jeeps, it is through models like the Renegade that FCA hopes to expand the brand outside North America.

Fiat shares have risen 44 percent, outpacing a 5.4 percent gain for the broader sector .SXAP, since the Italian company announced a January 1 deal to take full control of Chrysler and create the world's seventh-biggest carmaker. The stock closed 1.2 percent lower at 8.47 euros on Tuesday.

Manley said the small, entry-level Jeep is not only fuel efficient, but its compact size is better matched to narrower European roads than some other models in the brand's family.

The group, preparing to move its main share listing from Milan, Italy, to New York as soon as October 1, hopes its combined clout and profitable U.S. business can overcome European losses and propel it into the major league.

"This Jeep will enter a segment that's estimated to grow to more than 2 million vehicles on a global basis by the end of 2015 and in Europe alone, sales of small SUVs will reach nearly 700,000 within a year," he said.

At stake are thousands of jobs, particularly in Italy where Fiat Chrysler plans to make many of the new Alfa Romeo models.


The core Fiat marquee's future growth prospects now lie elsewhere, brand chief Olivier Francois said, pledging model updates tailored to Latin America and Asia, especially China, including a long overdue Punto revamp.

The Jeep Renegade will be produced at the Melfi plant in southern Italy, making it the first Jeep built exclusively outside the United States. Sales in Europe are expected to start in the third quarter of this year and in the United States later in the year.

"There is no easy fix," Francois said. "We are all realizing that notwithstanding Fiat's great European history, things have changed."

The small SUV retains many classic Jeep characteristics, with squared-off nose, boxy design and round headlights reflecting its Wrangler-derived DNA.

Marchionne is seeking to emulate rivals such as Volkswagen by building global brands and a strong position in the rapidly expanding and high-margin market for premium cars, particularly in Asia, where the group lags behind its main rivals.

The Renegade will also be built in Brazil as of 2015, FCA Chief Executive Sergio Marchionne said. The carmaker plans to start making Jeeps in China the following year, hoping to tap fast-growing demand for sport utility vehicles in both markets.

And Fiat Chrysler will achieve its goals with no capital increase and no dividends during the five-year plan, Marchionne said. The automaker expects its net profit to surge fivefold by 2018 to about 5 billion euros ($7 billion), while net industrial debt is projected to fall to 1 billion euros or less after peaking at about 11 billion euros next year.

The China plan, which is expected to add a Jeep to the plant Fiat runs with partner Guangzhou Automobile Group (601238.SS), is still conditional on government approvals.

The company forecast Alfa Romeo would multiply sales more than fivefold to 400,000 vehicles in 2018 as it invested 5 billion euros to add eight new models and ramp up production.

At the Melfi plant, the Renegade will share underpinnings with the Fiat 500X, a crossover version of its popular 500 model that is expected to be unveiled later this year.

Maserati sales would rise at a similar rate to 75,000 on the back of more than 2 billion euros of capital spending, while Jeep would double output to 1.9 million vehicles in 2018, almost half assembled at six new sites outside the United States./

Both the Jeep and the Fiat 500X are part of FCA's plan to turn around its ailing European operations by 2016, using idled Italian plants and creating jobs for thousands of workers who have been kept on temporary layoff arrangements for years.

FCA is investing 1 billion euros ($1.37 billion) to produce the new Jeep and a new 500 in Melfi. Investments and models planned for its other plants in Italy, including a relaunch of the sporty Alfa Romeo brand, will be presented in early May.

Unions at Melfi are hopeful brands like Jeep will create jobs and boost an economy struggling to recover from its longest postwar recession. But they are also worried what will happen if demand for the cars does not pick up as expected.

"There is no certainty over what share of the SUV market in Europe and elsewhere Fiat will be able to take, nor that they will manage to reinstate all the furloughed workers," said Emanuele de Nicola, the FIOM union's general secretary for the southern Basilicata region. "There are still too many questions."

($1 = 0.7277 euros)/

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