Fiat Chrysler aims to boost margins, keep jobs with European production plan

MILAN (Reuters) - Fiat Chrysler (FCA) FCHA.MI is expected to commit to producing a raft of new models in Italy, including Jeeps and an Alfa Romeo SUV, union sources said, as the carmaker strives to fill underutilized plants and lift profit margins in Europe.

FILE PHOTO: A logo of Fiat is pictured on the Fiat Panda at the 86th International Motor Show in Geneva, Switzerland, March 1, 2016. REUTERS/Denis Balibouse/File Photo

The plans, which the sources said would also include building a new Maserati sportscar in Italy, would deliver on the strategy outlined by the group’s late boss Sergio Marchionne.

New European chief Pietro Gorlier will meet with unions on Thursday to discuss the proposals and present them to journalists later that day.

FCA declined to comment.

FCA appointed Gorlier last month to tackle a region where profitability is below that of peers, thousands of workers are on temporary layoff schemes, and some plants run below capacity.

In his last strategy unveiled in June, Marchionne vowed to keep converting Italian plants to churn out Alfa Romeos, Jeeps and Maseratis instead of less profitable mass-market vehicles in an attempt to preserve jobs and boost margins.

FCA’s Melfi plant in southern Italy, which already produces the Jeep Renegade, is expected to also produce the Jeep Compass, the sources said. The Compass will replace the Fiat Punto, which was discontinued in August.

The Pomigliano factory near Naples is set to keep the Fiat Panda, the most sold vehicle in Italy, the people added, dismissing earlier reports the model could return to FCA’s plant in Poland, where it was made until 2011.

Pomigliano will also get the new Baby Jeep, smaller than the Renegade, which will be another model targeting European clients.

Unions have been awaiting news of product plans to see whether workers, some of whom have been on temporary layoff schemes for years, would be brought back,

Marchionne initially promised to fill all European plants by the end of 2018, but in June said that goal would likely slip to the end of the current strategy plan in 2022.

The Fiat brand will be reduced to a few models such as the iconic 500 and the popular Panda hatchback. The 500 family in particular will become a big part of the company’s electric vehicle drive in Europe.

The Mirafiori plant in Fiat’s hometown of Turin may be chosen to assemble the new electric Fiat 500, the sources said, but added the plans were not yet final, especially as the combustion engine version is currently made in Poland.

Mirafiori may also be used to revive the Fiat 500 Giardiniera wagon, they added.

Mirafiori already produces the Maserati Levante, but sales of the luxury SUV fell sharply in recent months due to weak Chinese demand. The Levante platform may also be used to produce a new SUV for the Alfa Romeo brand, bigger than the Stelvio SUV that was launched in 2016, the people said.

Maserati’s sporty Alfieri model will likely be made in the brand’s hometown of Modena, the sources added.

The world’s seventh-largest carmaker in June outlined a global plan to ramp up production of SUVs and invest 9 billion euros ($10.2 billion) - out of a total spending plan of around 45 billion euros - in electric and hybrid cars in an effort to double operating profit by 2022.

FCA's operating margin in Europe recovered to 3.2 percent last year, which compares with Europe-focused PSA Group's PEUP.PA global automotive margin of 7.3 percent. FCA expects that margin to grow to between 5 and 7 percent by 2022.

Reporting by Agnieszka Flak and Stefano Rebaudo; Editing by Mark Potter