* Shares close almost 12 pct lower after brief suspension
* Q1 loss underscores challenges for Fiat Chrysler
* Analysts question funding, some see capital increase
(Adds comments from presentation, closing shares)
By Stefano Rebaudo and Laurence Frost
MILAN/PARIS, May 7 Fiat Chrysler's
shares fell sharply on Wednesday as analysts questioned whether
the carmaker could achieve Chief Executive Sergio Marchionne's
new targets - and how his ambitious expansion plan would be
Trading was briefly suspended after the shares tumbled more
than 9 percent, before resuming their decline to close almost 12
percent lower at 7.48 euros, with investors still digesting
Tuesday's strategy presentation in Detroit.
Under the plan, outlined in 10 hours of analyst meetings,
Marchionne pledged to multiply sales, raise profitability and
slash debt by 2018, while investing 48 billion euros ($67
billion) in a global expansion led by the Jeep, Alfa Romeo and
"These targets were almost unnecessarily bullish, leaving
multiple execution challenges - even if they won't be tested for
several years," said Citi analyst Philip Watkins.
Quarterly earnings, also published late on Tuesday, were a
"major disappointment" that served to underline the challenge,
Watkins added in a note.
Fiat Chrysler swung to a 319 million euro net loss in
January-March from a 31 million profit a year earlier, missing
expectations with a 622 million euro trading profit.
The shares, which had risen 44 percent since Fiat announced
a Jan. 1 deal to take full control of Chrysler, opened late in
Milan as a result of heavy trading volumes.
"The first quarter was a timely reminder of the risks
associated with Fiat's plan," said Rabih Freiha of Exane BNP
Paribas, citing North American pricing pressure that the
brokerage expects to cause more trouble for Chrysler.
The promise to cut debt to 1 billion euros from an expected
11 billion peak next year was "one figure that we believe even
the bulls will have trouble justifying", Freiha added.
Marchionne, who vowed to remain at the helm of the company
for the duration of the five-year plan, said on Tuesday it
represented a new start for a combined group that has benefited
from a strong U.S. rebound while struggling through Europe's
But the 61-year-old CEO conceded that the plan's success was
not a certainty.
Early results will soon become apparent and the company can
"put the brakes on the process if it doesn't work", Marchionne
said, adding that he was "worried" by the size of the debt.
Other analysts suggested the group would have to raise new
share capital, a move Marchionne had sought to rule out while
leaving the door open to a mandatory convertible bond issue.
"Fiat's massive plan, and the necessary capital expenditure
and R&D, simply do not look affordable or prudent," said Max
Warburton of Bernstein Research.
Calling its financial targets "enormously optimistic",
Warburton said: "Fiat would do everyone a favour, including its
employees, management and shareholders, by raising capital."
($1 = 0.7177 euros)
(Additional reporting by Bernie Woodall in Detroit and Lisa
Jucca in Milan; Editing by Mark Potter and Pravin Char)