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Fiat 500L key to success in Europe and US
<p> <strong>Fiat 500L key to success in Europe and U.S.</strong></p>

Chrysler Earns $1.7 Billion in 2012, Tweaks Product Plan

Marchionne says the U.S. market is due for seven Fiat models, six Alfa Romeo vehicles and refreshes or replacements for Chrysler&rsquo;s American brands.

Fiat-Chrysler CEO Sergio Marchionne reveals a revamped business plan that includes eight new Fiat vehicles and six Alfa Romeos headed for the U.S. market by model-year ’16.

Two of those products, the longer-wheelbase Fiat 500L and Alfa Romeo 4C, already have been announced, but Marchionne doesn’t reveal details on the remainder of the slate in two conference calls today to discuss year-end earnings with analysts and journalists.

Some of the Fiat-branded cars could be additional variants of the 500 subcompact, as the product blueprint counts the 500 Abarth and the forthcoming 500e electric vehicle as separate models. The forward-looking plan, unlike the previous version revealed in 2010, does not specify at which market segments the vehicles will be aimed.

The influx of Fiats comes as Marchionne seeks to grow profitability of both auto makers. Chrysler earned $1.7 billion in 2012, up from $183 million in 2011. Fiat’s net profit dropped from €1.651 million ($2.24 billion) in 2011 to €1.411 million ($1.91 billion) in 2012.

However, both auto makers saw gains in the fourth-quarter, with Fiat’s net profit growing to €388 million ($525.7 million) from €265 million ($359 million) in like-2011, and Chrysler’s net income increasing to $378 million from $225 million the prior year.

Chrysler Chief Financial Officer Richard Palmer says Fiat will not borrow money from Chrysler to stabilize its operations. “Both companies have adequate liquidity.”

A casualty of Europe’s slumping market, Fiat cut the second shift at its Tychy, Poland, plant, which builds the Fiat Panda. “We are working to find another car to replace the Panda in Poland,” Marchionne says, without giving a timeline.

Marchionne is hopeful that exports of the 500L to the U.S. as well as two new SUVs built in Fiat’s Melfi, Italy, plant – one a new Jeep – will help the auto maker’s profit picture in Europe, as well.

“The (500L) is going to do well in the United States,” Marchionne says. “We’re working diligently to make sure it has the right powertain. It’s certainly a significant addition to the 500 offering.”

Chrysler was able to save $284 million in costs through its “World Class Manufacturing” initiatives, reducing plant injuries and improving efficiency, but Marchionne says the auto maker is far from reaching its potential there.

“The intent here is to try and get every plant on the same page by a given date. It’s a very intense process,” he says, noting the Sterling Heights, MI, facility which builds the 200 will see improvements when the new model launches for ’14.

Chrysler increased its marketing spend last year and is planning on boosting incentives further this year to move aging product, Marchionne says. “We are overspending. And we understand this. But we’re doing this for a very clear objective, a very clear intent.”

His goal is to have Fiat and Chrysler as “one combined corporate entity” and is in the process of shifting management to accommodate a growing global operation. However, Fiat must settle on a purchase price for Chrysler’s shares held by the United Auto Workers union’s Voluntary Employees Benefit Assn. retiree health-care trust.

“If we cannot find a way to satisfy (the) VEBA, then I think the company will go public,” Marchionne says. There is no specific timeline as to when Fiat will complete ownership of Chrysler; “as soon as I can afford it,” he says.

Fiat currently owns 58.5% of Chrysler, while the VEBA owns 41.5%.

Marchionne credits Chrysler’s resurgence to the expanded global-market penetration of the Jeep brand and the re-launch of the Ram 1500, but notes some product lines have been neglected due to financial constraints.

Some Chrysler products scheduled for launch this year or beyond have been delayed as money was shifted toward upgrading the Jeep Grand Cherokee. That could happen again with the current plan revealed today, which Marchionne says may not be permanent.

The new product slate calls for a wave of new Dodge and Chrysler vehicles built from Chrysler architectures, rather than Fiat platforms as had been outlined in the previous plan.

In 2014, Chrysler introduces its new midsize entry, though Marchionne refers to it as the “200 successor,” leaving speculation open as to whether that nameplate will survive.

The CEO reveals the car also will receive the ZF-supplied 9-speed transmission, which will debut on the forthcoming Jeep Liberty replacement and also is planned for the Dodge Dart.

The Chrysler brand gets three more new vehicles for model-year ’15, while the Dodge brand gets one new model for ’14 and one for ’15. Another Dodge vehicle gets a refresh in 2015.

Marchionne confirms a new minivan is coming for 2015 and a prototype currently is being tested, but he continues to hold close to the vest whether it will be badged a Chrysler or Dodge. During the North American International Auto Show, he said one brand would get a “people carrier” in place of its outgoing minivan.

“We’ve done a lot to try and improve the minivan offering. We’re structurally limited by what we inherited,” he says

The Jeep brand was due to receive three Fiat-based SUVs in 2013 under the old plan, but will now receive one Fiat-based SUV in 2014 and four Chrysler-based SUVs in 2015 and 2016. The Fiat-based model previously was announced by Marchionne during a quarterly earnings call last year.

The Ram brand will get a Fiat-based vehicle to be unveiled in 2014 and two Chrysler-based models by 2016. A previous plan suggested Ram would have a small, Fiat-based commercial van and a Chrysler-based midsize truck slotting below its 1500 pickup.

The SRT brand receives one new Chrysler-based vehicle in 2016. It could be a wholly new SRT product, an SRT treatment of an existing Chrysler product or a rebirth of a legacy vehicle – much like the former Dodge Viper.

Short term, Marchionne says sales will continue to be driven by Jeep, Ram and the new Dodge Dart, which isn’t expected to see optimal sales until 2014. Marchionne has said demand for the compact is sluggish because only manual and dual-clutch transmissions, not a full automatic, were offered at launch.

“I think we went to an overextended position by offering a variety of versions of Dart,” he says. “We have probably over-served the market by providing what we’ve got.

“If it weren’t for a non-comprehensive powertrain solution, it would have done a lot better.”

Marchionne warns first-quarter production will be down from like-2012, as some plants retool for new models or phase out older ones.

“I want to make sure we don’t surprise anybody,” he says of the advisory.

In the U.S., Chrysler’s fleet mix dropped to a 3-year low of 22% for fourth-quarter ’12. It reached a high of 44% in first-quarter ’10 and went as low as 23% in fourth-quarter ’11.

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