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Fiat Chrysler bets on Jeep, Alfa revamp to go global

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(GlobalPost/GlobalPost)

By Agnieszka Flak and Bernie Woodall

DETROIT (Reuters) - Fiat Chrysler <FIA.MI> pledged a breakneck expansion for Alfa Romeo and Jeep as the newly-merged group outlined long-awaited plans to transform itself into a global carmaking powerhouse within five years.

Chief Executive Sergio Marchionne is putting the group's upscale brands - also including Maserati - at the heart of his ambitious strategy to narrow the gap with industry leaders such as Volkswagen <VOWG_p.DE> and Toyota <7203.T>.

Alfa Romeo will multiply sales more than fivefold to 400,000 vehicles as the company invests 5 billion euros ($7 billion) to add eight new models and ramp up production, division chief Harald Wester forecast on Tuesday.

"We wanted Alfa to benchmark itself against the best that the German automotive industry had to offer," he told analysts and reporters on a day of presentations in Detroit.

Jeep will double output to 1.9 million vehicles in 2018, almost half assembled at six new sites outside the United States, as it adds production in Asia, Latin America and Europe backed by 1,300 new dealers, division chief Mike Manley said.

Global production will unlock Jeep's potential in markets such as Asia, Manley said.

"Today we're a niche player because we're an import-only brand," he said, adding that the Fiat Chrysler merger and investment commitments would quickly overcome those limits.

Italy's Fiat took full control of Chrysler earlier this year to create the world's seventh-biggest carmaker, hoping the profitable U.S. business and combined group scale would overcome European losses and propel it into the major league.

At stake beyond the future of its historic carmaking names are thousands of jobs, particularly in Italy where Fiat Chrysler plans to manufacture many of the new Alfa Romeo models.

The challenges are huge, however.

Analysts expect the revamp is likely to require capital spending of at least 8 billion euros a year - a big burden for a group with 9.8 billion euros of net debt.

Then there is the market backdrop. Europe's car industry is battling to recover from a six-year slump in sales, while demand in some of Fiat Chrysler's most important emerging markets, such as Brazil, is faltering.

Marchionne has also failed to deliver a string of ambitious targets in ten years at Fiat's helm, with its main European business losing market share amid delayed investments and some bad design choices.

"Of all the plans presented so far, Jeep is both the most interesting and the most tangible," said ISI Group analyst George Galliers from the sidelines of the presentations.

"The opportunity is clearly there, but 1.9 million Jeep units is a stretch," he added. The brokerage has forecast Jeep sales of 1.2 million in 2018.

Fiat Chrysler shares, which have risen sharply in recent weeks on hopes for its revamp plan, were down 1.8 percent to 8.425 euros by 12:55 pm ET (1455 GMT), lagging a 1 percent decline in the European automakers index <.SXAP>

Jeep, whose globally recognized products trace their roots to the iconic World War Two vehicle, is seen as Marchionne's biggest opportunity to tap fast-growing demand for sport utility vehicles (SUV) in Asia.

The expanded production footprint outlined on Tuesday includes facilities already announced for Brazil and China.

(Writing by Laurence Frost; Editing by Ken Wills and Mark Potter)

http://www.globalpost.com/dispatch/news/thomson-reuters/140506/fiat-chrysler-sees-jeep-sales-at-19-million-vehicles-2018