Fiat cannot match Chrysler margins, CEO says: report

MILAN (Reuters) - Fiat SpA (FIA.MI) will not be able to reach an operating margin of 7-7.7 percent targeted by U.S. sister car maker Chrysler because Europe has not cut capacity, Chief Executive Sergio Marchionne told Automotive News magazine.

Marchionne, who also heads Chrysler, said in the interview published on Monday he expected the two carmakers to reach 5.5 million car sales a year "certainly before 2014," with half from Chrysler, in which Fiat currently has a 20 percent stake.

"I do think a decent business on the car side which is run efficiently can produce 7 to 7.7 percent in the United States. Is that number possible in the European market place ... The answer is no," he said in the interview, which was conducted on November 21. The full text is available at www.autonews.com

"In Europe, structural overcapacity has not been addressed ... The Obama administration ... has forced a restructuring on this industry where emerging companies, post-bankruptcy, are going to be much better suited to drive returns on capital," he said.

Marchionne confirmed A-segment city cars and their engines for the U.S. market would be produced in the North American Free Trade Agreement (NAFTA) area. Fiat expects to produce its Cinquecento city car in the United States by 2011.

Marchionne launched a detailed presentation of plans for Chrysler's brands -- Chrysler, Dodge, Ram and Jeep -- in Detroit on November 4 and has said he will make a presentation for Fiat in the first quarter of 2010.

The two companies will share architectures for some car production and Fiat has promised the U.S. government it will provide its technology for building smaller, less-polluting cars to Chrysler.

Marchionne told Automotive News that a cross-shareholding model for the two companies, like that of Renault (RENA.PA) and Nissan, was valid "only to a point," and that another option was "one that ... allows for a much deeper level of integration which does not require cross-shareholding."

He did not elaborate further.

For the Chrysler marque and Fiat's Lancia product line, Marchionne said the two would function as one brand in the future, with Chrysler strong in the United States.

"Brand rationalization continues to be the key driver here. It takes a huge amount of money to maintain a brand," Marchionne said. Lancia is strong in some European countries, he added. Lancia head Olivier Francois is also in charge of Chrysler.

Marchionne said he was "available ... at any time" to meet Chrysler dealers but added the only question was "whether it's effective or whether it's needed."

On the Jeep brand, which is Chrysler's most internationally-recognized line-up, Marchionne said the new fuel-efficient V-6 Pentastar engine would be available on the Grand Cherokee model in May 2010.

He also said Jeep Commander models could eventually be produced in China or Russia.

"I need to find an alternative to the production site," he said, once existing shared sites are converted to the new Grand Cherokee.

"China and Russia are possibilities," he said.

(Reporting by Jo Winterbottom; editing by Karen Foster)