* Targets Wall Street listing for merged group in October
* But truck maker CNH has struggled to create liquidity
* CEO sees difficulties, but Chrysler has 'Cinderella' story
* U.S. sales, market upturn should attract U.S. investors
MILAN, June 27 (Reuters) - Sergio Marchionne needs a New York stock market listing to bring in the investors required to fund future growth at Fiat Chrysler, but a lukewarm response to the chief executive's most recent Wall Street launch suggests he has a bumpy journey ahead.
Fiat expects to finalise the merger with its U.S. unit Chrysler this year. Marchionne plans an October listing in New York for Fiat Chrysler Automobiles (FCA) to help foot the bill for his 48 billion euro ($65 billion) spending plan to grow net profits five-fold and sales by 60 percent within five years.
Fiat shares currently trade in Milan, where they will be replaced by FCA stock. But it is a Wall Street presence that would give the world's seventh-largest car group access to wider equity and debt sources to fund the investments it needs to rival Germany's Volkswagen and BMW in the premium segment, particularly in the tough European market with its fragile economy and over-capacity in mass-market brands.
However, FCA must first solve a conundrum: it needs U.S. investors to trade the stock in order to create enough liquidity to make it a usable asset - but the investors won't come until it can offer a stock with high trading volumes.
And last year's Wall Street listing of sister company CNH Industrial provides little encouragement.
Eight months on, only around 100,000 shares in the truck and tractor maker - created by tying up Italy's Fiat Industrial with U.S. holding company CNH Global - are traded on average daily in New York. 30-day average trading volumes of its Milan secondary listing are 30 times higher, Thomson Reuters data show.
Marchionne, also CNH Industrial chairman, acknowledged the difficulties, and suggested he was prepared for a long haul with both CNH and Fiat Chrysler.
"We need to spend a lot more time in the street talking to investors to try and get them buying in Europe and then trading in the U.S.," Marchionne said last week. "It'll take 2 or 3 years to get it done properly. FCA has got the same issue."
Among the problems CNH Industrial faces is that U.S. investors still see it as a foreign company that's difficult to get to grips with because it was 88-percent owned by Fiat Industrial before the merger.
That image was underlined by the six months the merged company took after its U.S. listing to switch to reporting results in U.S. dollars and to U.S. GAAP accounting principles.
Investors say CNH, which produces construction and farming equipment along with buses and trucks and is present in 190 countries, is not a "clean story" as other machinery stocks and that's a lot to get to grips with.
The fact that it listed on the brink of a downturn in the agricultural machinery sector did not help either.
By contrast, Marchionne plans to market FCA as a Cinderella tale after Fiat helped rescue Chrysler in 2009 and turned the U.S. carmaker into a key profit centre for the merged group.
"People in the U.S. like Chrysler, they like what happened," he said. "We were the poor kids, the Cinderella of the ball; we were given 2 cents to make it to Christmas and we are still here. We paid all the money back and it was clean."
Fiat plans to sell the 2.76 percent of its own shares it owns - a holding valued at around 260 million euros - to American investors to get "the machine rolling", he added.
History suggests some auto groups have struggled in the U.S. - German luxury carmaker Daimler, which also merged with Chrysler in 1998 before selling the unit in 2007, decided to discontinue its U.S. listing in 2010 when it failed to generate the trading volumes executives had hoped for.
According to a study available on the London Stock Exchange website, DaimlerChrysler's U.S. trading volumes as a percentage of worldwide trading dropped from 32.8 percent just before the merger in November 1998 to 5.8 percent 10 months later.
"I'm concerned the same thing could happen with FCA: if Americans don't see this as a U.S. firm, you will only see people buying the stock in Europe," a New York-based investment banker said, but added that FCA's valuation "should be high".
But FCA has a big advantage as it heads for Wall Street in its turn: the American market contributes over half of its revenues and that market is recovering. U.S. vehicle sales were up 11.3 percent in May to the best for that month in seven years and Chrysler's U.S. car sales rose a higher-than-expected 17 percent in May as demand for Jeeps jumped 58 percent.
Investors will likely wait for first signs of Marchionne's growth strategy working before placing their bets, fund managers said, but Chrysler's strong U.S. figures will make up for some of FCA's exposure to weak markets in Europe and Latin America.
Being one of the "Detroit three" also means that any play on the U.S. car market will have to include FCA, Marchionne added.
"If you want to play the U.S. car market, you either buy GM or you buy Ford or you buy us," he said. "We are the only other true proxy to the U.S. market."
Ultimately, the success of FCA's listing will come down to fundamentals and growth potential, other investors said.
"The appetite for Chrysler will be good, but in the end it will be about cash flow and earnings. If they can grow like Ford and GM are expected to do, the stock will do well," said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas, Texas. ($1 = 0.7359 Euros) (Additional reporting by Stefano Rebaudo in Milan, Jane Barrett and Costas Pitas in London; Editing by Sophie Walker)