* New plant in Brazil to open next year, help boost sales
* FCA considering options to help fund premium strategy
* Alfa Romeo production to stay in Italy - CEO
By Agnieszka Flak
GENEVA, March 4 Fiat Chrysler Automobiles (FCA)
expects a new plant in Brazil to boost its
profitability in that market by 2017 after a cut to subsidies
and currency effects hit profits there last year, Chief
Executive Sergio Marchionne said on Tuesday.
FCA, created after Fiat took full control of Chrysler in
January in a $4.35 billion deal to create the world's
seventh-largest auto group, cut its 2014 profit forecast after
an 80-percent slump in Latin American core earnings in the final
quarter of 2013.
Brazil used to account for about one fifth of Fiat profit,
helping to offset losses in Europe, but an end to car sales
incentives, higher input costs and currency effects have weighed
on profitability in the region.
"I'm absolutely convinced that by 2017, which will be the
first year of full production at the Pernambuco plant, we will
return to making double digit margins in Brazil," Marchionne
told journalists at the Geneva auto show. He did not say whether
the margins referred to profit or sales.
The Pernambuco plant, which will open next year, will
produce models that better match market demand, Marchionne has
said. It will build the small Jeep Renegade that FCA unveiled at
the car show, and whose production has already started at a
plant in Italy, among other models.
Marchionne said he was optimistic about the market recovery
in Europe, but added he did not think underlying problems of
oversupply had been cured, and cuts in production were needed
for the recovery to gain momentum.
"Supply issues still continue to be a big problem in Europe
and we've only partially dealt with that," he said.
Marchionne expects a new strategy focusing on premium car
brands such as Maserati and Alfa Romeo for exports to help
override some of the weak demand in its traditional markets,
especially Italy. A new industrial plan outlining new models and
investments will be presented in May.
Marchionne said a convertible bond remained among FCA's
options to boost capital and help fund the shift upmarket that
will help it break even in Europe by 2016. A decision on the
bond or another option may be announced with the May plan.
Fiat's financing has been a key concern among analysts who
fear the group, which took full control of U.S. unit Chrysler in
January, may struggle to find all the cash it needs to revamp
idled plants in Italy and roll out a whole range of Alfa Romeos
and Maseratis at the heart of its recovery plan.
"Whatever will happen (on the financing), it will happen
after we've finalised the merger, moved the listing to New York
... so it will take until at least the fourth quarter if not
until next year," he said.
Marchionne reiterated a share issue was not feasible in the
current market conditions. Listing or selling parts of its
luxury brands Ferrari and Maserati would remain an option for
the future, but would not be part of the May plan, he added.
FCA plans to list the merged group in the United States as
of Oct. 1, but acknowledged it may be tough to do so.
The carmaker expects to keep the production of its sporty
Alfa Romeo brand in Italy, he said, adding that productivity at
the Italian plants had improved greatly and was on a par with
other production sites in Eastern Europe.
"It's not a nationalistic thing, but there are some things
that belong to a place," Marchionne said, adding that, at least
in his time as CEO, Alfas would be assembled in Italy. "Alfa
Romeo belongs to Italy as Maserati and Ferrari do."
Marchionne said the first new Alfa to be developed under the
new plan would be produced before the end of next year.