Fiat's baby Jeep is first step in European recovery plan
MILAN (Reuters) - Fiat will unveil details on Thursday of plans to make two small sports utility vehicles (SUVs) in southern Italy, including a new baby Jeep, as it attempts to turn around its ailing European operations by as early as 2015.
European mass-market car makers are all grappling with a devastating five-year market slump, with sales in western Europe now at levels last seen in 1995.
Some manufacturers, such as Ford (F.N), General Motors (GM.N) and Peugeot (PEUP.PA), have chosen to shut plants.
Fiat, which owns U.S. car maker Chrysler, and Germany's Volkswagen (VOWG_p.DE), have opted instead to increase investment and the Italian company intends to launch 15 new models over the next four years.
Fiat announced in the autumn that it would stop European losses in two years' time by spending between 7.5 billion euros ($9.9 billion) and 8.5 billion euros next year on new models for its premium brands Alfa Romeo and Maserati - at least 1.3 billion euros more than previously earmarked.
It then plans to spend as much as 9.5 billion euros in 2014.
Fiat is betting on strong demand for its Jeep, Fiat 500, Alfa Romeo and Maserati brands in the U.S. and in foreign markets such as Russia, India and China.
It will start its new investment plan with the two new small SUVs at Melfi, one of its five Italian factories, where workers have been on temporary layoff for months.
Fiat's plan to shift focus from low-margin mass-market models such as the Punto to its upscale brands was met with skepticism from investors. Most analysts would rather see Fiat close excess manufacturing capacity than spend more money in a risky bid to sell more cars.
"While Fitch believes that this strategy makes sense, it carries substantial execution risk, particularly in the current extremely difficult competitive environment," ratings agency Fitch said this week.
A November 19 research note from UBS said that it was downgrading its rating for Fiat and that the company's export strategy looked flawed because it would not result in the production of enough cars to make Fiat's plants run at full capacity.
"Looking at the actual output of Fiat's main European plants over the past five-plus years, we calculate that Fiat could produce about one million cars more than it will in 2012," UBS wrote.
Fiat closed a factory in Sicily at the end of 2011. Instead of shutting plants, it has dealt with falling demand by using Italy's temporary layoff rules, which allow big industries to leave plants idle for months on end while the workforce waits at home.
Fiat's 5,000 workers at Melfi, where the Grande Punto is made, were told on Tuesday that the temporary layoffs there will last until the end of January.
Fiat said in October that it intends to launch three new made-in-Italy cars next year; the Maserati luxury sedans Quattroporte and Ghibli, and a new Alfa Romeo, probably the futuristic, super-light 4C sports car. The Quattroporte was unveiled on December 10 in Nice and will make its public debut at the Detroit car show in January.
The new Melfi-made Jeep will be the smallest Jeep yet - a front wheel-drive model that is due in late spring 2014 and may be called the Jeepster or Scamp. It will have a Fiat-badged companion, the Fiat 500X, a small crossover vehicle that will also be sold in the U.S. and is due out before the new Jeep.
Fiat is building an entire brand out of the 500 model, much in the same way that BMW did with the Mini. Small crossovers are hot in Europe and are now attracting growing demand in the United States, too.
For 2014 it has five models slated for launch, including a Fiat (the 500X), two Alfa Romeos (one of which is certainly the long-awaited Giulia sedan), the aforementioned Jeep and the Maserati Levante SUV.
Maserati will spend more than 1 billion euros on the new launches over 2012/14 and is targeting sales of 50,000 a year.
Alfa Romeo will also invest 1 billion euros over the same period and is targeting sales of 300,000-plus by 2016, more than three times its worldwide sales of about 100,000 this year.
(Reporting by Jennifer Clark and Paul Lienert; Editing by David Goodman)
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