* Fiat Chrysler presents 5-year business plan in Detroit
* Aims to make Jeep, Alfa Romeo and Maserati global brands
* Financing, market headwinds, past missteps raise doubts
(Adds details of business plan, analyst comment)
By Bernie Woodall and Agnieszka Flak
DETROIT, May 6 Fiat Chrysler is betting
on a breakneck expansion of its upmarket Alfa Romeo, Jeep and
Maserati brands to transform itself into a global carmaking
powerhouse within five years.
The newly merged group outlined a long-awaited business plan
on Tuesday, aiming to revive its historic carmaking names and
persuade investors it can overcome high debt, an uncertain
market and past missteps to close in on industry leaders such as
Volkswagen AG and Toyota Motor Corp.
"Today is much more than a new chapter. We are writing an
entire new book," Chief Executive Sergio Marchionne told
reporters and analysts during a day of presentations in Detroit.
Besides an aggressive, belated push into Asia, Marchionne
promised to increase North American sales by half as Chrysler
broadens its lineup and the embattled Dodge brand digs in.
The carmaker kept its options open to finance the plan, but
ruled out a capital increase or any divestment. He said one of
the options was a mandatory convertible bond, but no decision
has been made.
Fiat Chrysler said it would invest billions of dollars to
build new models and ramp up output, predicting sales would
surge to almost 7 million vehicles by 2018 from 4.4 million last
year - a target some analysts thought highly ambitious.
"It's definitely a tall order, but I don't think we ever
expected anything less from Marchionne in terms of the
ambition," said Exane-BNP Paribas analyst Stuart Pearson.
"Even getting half or two-thirds of the way to those
business plan targets would be a positive achievement
industrially - it's then a question of what investors are
expecting and what's already priced into the shares."
Fiat shares have risen 44 percent, outpacing a 5.4 percent
gain for the broader sector, since the Italian company
announced a Jan. 1 deal to take full control of Chrysler and
create the world's seventh-biggest carmaker. The stock closed
1.2 percent lower at 8.47 euros on Tuesday.
The group, preparing to move its main share listing from
Milan, Italy, to New York as soon as Oct. 1, hopes its combined
clout and profitable U.S. business can overcome European losses
and propel it into the major league.
At stake are thousands of jobs, particularly in Italy where
Fiat Chrysler plans to make many of the new Alfa Romeo models.
The core Fiat marque's future growth prospects now lie
elsewhere, brand chief Olivier Francois said, pledging model
updates tailored to Latin America and Asia, especially China,
including a long overdue Punto revamp.
"There is no easy fix," Francois said. "We are all realizing
that notwithstanding Fiat's great European history, things have
Marchionne is seeking to emulate rivals such as Volkswagen
by building global brands and a strong position in the rapidly
expanding and high-margin market for premium cars, particularly
in Asia, where the group lags behind its main rivals.
And Fiat Chrysler will achieve its goals with no capital
increase and no dividends during the five-year plan, Marchionne
said. The automaker expects its net profit to surge fivefold by
2018 to about 5 billion euros ($7 billion), while net industrial
debt is projected to fall to 1 billion euros or less after
peaking at about 11 billion euros next year.
The company forecast Alfa Romeo would multiply sales more
than fivefold to 400,000 vehicles in 2018 as it invested 5
billion euros to add eight new models and ramp up production.
Maserati sales would rise at a similar rate to 75,000 on the
back of more than 2 billion euros of capital spending, while
Jeep would double output to 1.9 million vehicles in 2018, almost
half assembled at six new sites outside the United States.
With sales of the mass-market Fiat brand expected to remain
flat in a struggling European market over the coming years,
analysts said the strategy made sense, though some were
skeptical of the sales targets.
"The opportunity is clearly there, but 1.9 million Jeep
units is a stretch," ISI Group analyst George Galliers said from
the sidelines of the presentations. The brokerage has forecast
Jeep sales of 1.2 million in 2018.
Jeep, whose globally recognised products trace their roots
to the iconic World War Two vehicle, is seen as Fiat Chrysler's
biggest opportunity to tap fast-growing demand for sport utility
vehicles (SUVs) in Asia.
While Marchionne has a track record of dealmaking in 10
years at Fiat's helm, he has been less successful at delivering
a string of ambitious turnaround plans, with Fiat losing market
share in its main European market amid delayed investments and
some bad design choices.
There are other challenges too. Analysts expect the total
cost of the revamp could top 8 billion euros a year - a big
burden for a group with 9.8 billion euros of net debt.
The company said on Tuesday it ended the first quarter with
a net loss of 319 million euros, hit by one-off charges linked
to a deal to fully acquire its U.S. operations and by currency
fluctuations. It also reaffirmed its forecast for the year.
Then there is the market backdrop. Europe's car industry is
battling to recover from a six-year slump in sales, while demand
is faltering in some of Fiat Chrysler's most important emerging
markets, such as Brazil.
The U.S. market is altogether more buoyant, but Chrysler and
Dodge have suffered lately from an investment slowdown in new
For the Dodge lineup, which lost ground as deliveries fell 6
percent through April, the company pledged to hold sales steady
at 600,000 vehicles despite the discontinuation of the Avenger
sedan and Grand Caravan people-mover.
"They kept Dodge because a performance brand can be
profitable," said IHS Automotive analyst Stephanie Brinley.
But Chrysler will add a subcompact 100 sedan and new SUVs
including a plug-in hybrid to restore sales from 350,000 last
year back to their 2005 peak of 800,000, the company said.
Independent analyst Maryann Keller said the profits in North
America, a recovering Europe and the strong Jeep brand make the
plan doable for Marchionne. "I think he can pull it off because
he has Chrysler, and we're in a decent economy."
($1 = 0.7177 euros)
(Writing by Laurence Frost, additional reporting by Ben Klayman
in Detroit; Editing by Mark Potter, Matthew Lewis and Ken Wills)