Jeep expands in Europe as Fiat, Chrysler integrate

A new rollout of Jeep models for Europe shows the deepening integration between Fiat and Chrysler, CEO Sergio Marchionne said Tuesday, the same day the Italian automaker revealed it had increased its ownership of the once-bankrupt U.S. company to 30 percent.

Marchionne, who heads both companies, said that because Jeep is one of Chrysler's most marketable products outside the United States, it will be key to helping it return to health. Jeep represents 50 percent of Chrysler's international volumes.

"This is the only true international brand that Chrysler has," Marchionne said at Fiat's test track near its Turin headquarters, where three Jeep models were being presented to the media in Chrysler's first European event. "It defined the segment. Kleenex defined tissues, and Jeep defined SUVs.'

Marchionne has been working to integrate the companies since June 2009, when Fiat was awarded an initial 20 percent stake in the automaker in exchange for small car technology, cleaner burning engines and management know-how.

Fiat's attempts to revive Chrysler have so far been helped by a demand rebound after the financial crisis, though the company admitted the earthquake in Japan is expected to lift prices on some models due to delays in component supplies.

Now, Marchionne hopes Jeep's European comeback can give an extra boost to Chrysler's recovery, even in the face of higher oil prices.

The Jeep Grand Cherokee can come equipped with cleaner burning diesel engines, Fiat's 3.0 liter Multi-jet 2, reducing consumption by a full 20 percent. Jeep achieved similar results with the Wrangler with the addition of the start/stop technology, which turns off the vehicle automatically at an idle stop and allows easy reignition, and other engine adjustments.

The new Compass, restyled to better reflect Jeep's sturdy image, completes the European lineup.

Marchionne said reducing consumption in the Jeep brand vehicles is an acknowledgment that European drivers seek fuel economy as much, if not more, than Jeep's off-road capabilities and handling.

"I think it is crucial for Jeep. You see the 3-liter, Multijet 2 diesel" Marchionne said. "That would have been impossible for them to do" without Fiat.

Jeep, which was born in 1941 and earned its rugged reputation in the heat of World War II, aims to multiply its European sales to 125,000 a year by 2014, from a meager 15,000 in 2010, brand manager Mike Manley said.

"The footprint in Europe was very, very small. Now we feel working with Fiat we have their strengths, we have access to the market in a way we didn't before," Manley said.

That includes access to Fiat's dealer network, which Marchionne indicated is a key element of the integration.

"The quality of the integration is visible today, the way it is being distributed in Europe as if it was Fiat," Marchionne said.

After hitting lows in 2009, worldwide sales of Jeep rose 24 percent in 2010 and were up 36 percent in the first quarter of 2011, mostly on strong sales in North America and good results in Asia-Pacific, Manley said.

Europe remained weak, growing just 7 percent, a fact Manley attributed to the transition to the Fiat network.

Manley said he expects to reach global sales of 800,000 vehicles a year by 2014 - and that number would go even higher after Jeep secures deals to produce in China and Russia. Fiat is seeking a new partner in Russia after a deal with local company Sollers fell through. Jeep expects also to be part of Fiat's venture in China, signed in 2009 with state-owned Guangzhou Automobile Group Co.

Marchionne said the Alfa Romeo 4C two-seater that appeared as a concept car in Geneva this year will be the brand's first to go on sale in the United States when Alfa makes its return toward the end of 2012. The super-light sports car, to be made of carbon fiber more common in a Ferrari or Lamborghini, is not expected to be a mass-production car, but rather will be the standard-bearer of Alfa's sporty image. It will be followed by an Alfa-branded SUV, to be built in Turin along with a new Jeep.

Marchionne was candid about his disappointment with the looks of the Giulia, a D-class sedan that is eventually destined for the U.S. market. He asked for a new design of the exteriors but assured that will not result in production delays and that the engineering and architecture are "solid."

"I found the current proposal unacceptable. I wouldn't call it ugly. I don't think it's an Alfa. The one I saw, if I took the badge off, I wouldn't know it's an Alfa," Marchionne said.

Fiat's share of the company rose to 25 percent in January when it met the first government benchmark by making a fuel-efficient, four-cylinder engine at a factory in Dundee, Michigan. The extra 5 percent stake it received Tuesday was contingent on a rise in Chrysler's sales outside North America, compensation to Chrysler for Fiat's use of its technology and recruitment of dealers in Europe and Brazil to sell Chrysler models.

Marchionne hopes to increase Fiat's stake to 35 percent by the end of the year with the introduction of a 40 mpg car.

Then Fiat would be clear to purchase an additional 16 percent, raising its stake to 51 percent.

Marchionne has said that Fiat wants to refinance its government loans before returning Chrysler to the public stock market. At first he thought the initial public offering could come late this year, but recently has said it could be delayed.

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