“I think in the next 24 months at the most we will arrive at 35 percent,” said Sergio Marchionne, the CEO of Fiat, following a Fiat shareholders meeting in Turin, Italy.
Following a bankruptcy in the summer of 2008, Chrysler asked Fiat to take 20 percent stake in the company without any cash payment in return for Fiat’s technological know-how. Marchionne has agreed to manage both Chrysler and Fiat as the CEO—much like the way Carlos Ghosn leads both Renault and Nissan—and both companies are in partnership to share technologies, distribution, and capital.
Marchionne offered a positive outlook for the future. “The important thing is that Chrysler is progressing on its turnaround plan. The results are good,” he said.
Increasing Stake in Steps
Chrysler has set a series of goals for Fiat if the latter wanted to increase its stake to more than 20 percent in the American auto giant.
Some of these goals include selling a car in the United States that gets more than 40 miles per gallon, producing a fuel-efficient engine on the territory of United States and also increasing Chrysler’s international sales.
To satisfy a portion of goals in order to increase the stake by 5 percent in Chrysler, Fiat is set to release the new Fiat 500 subcompact electric model in the U.S. market.
“There are three steps of 5 percent. We will do one share this year, with the launch of the 500 in the United States,” said Marchionne in a press conference after the shareholders meeting.
Targeting Fuel Efficiency
Chrysler will certainly draw upon Fiat’s technology, as Fiat is considered the most fuel-efficient car company in Europe.
Marchionne’s strategy consists of taking Chrysler’s high-output V8-powered large sedans, sport utility vehicles, and pickup trucks and combining them with fuel-efficient technology, producing a new breed of American cars.The first model born out of Chrysler-Fiat marriage is the redesign of Jeep Grand Cherokee. It will showcase the new fuel-efficient engine named “Pentastar” that was developed with the help of Fiat’s technological know-how of direct injection and turbocharging.
“The Pentastar engine is a cornerstone of Chrysler’s efforts to reinvent its business model with strong, brand-focused, world-class quality products,” said Scott Garberding, who is the head of Chrysler manufacturing, in a statement.
Returning to Profitability
In face of emerging out of crisis, Marchionne still feels that the economy will not experience a fast rebound. “This year will be a year of transition because markets are still quite difficult,” he said in a Bloomberg report. He expects that car sales in Europe will hit its lowest point since 1994, declining 15 percent from 2009. Auto sales on the European continent have slowed their growth to 3.2 percent down from 13 percent in January.
On April 21, Sergio plans to give a strategy update to the shareholders. He confirmed that at the least he expects a breakeven this year and additionally hopes to post a profit of $1.5 billion before interest, taxes, and one-time gains in 2011.
As part of Fiat’s expansion, it has decided to close its Termini Imerese plant in Sicily, employing around 1,500 workers, which has caused much uproar in Italy. The local public is accusing Fiat of selling out its own country for bigger profits and transferring home jobs elsewhere.
“Choosing to go abroad was not a whim and certainly Fiat did not expand forgetting Italy,” was Marchionne’s response to the shareholders at an annual meeting in Turin. “We expanded to make this company stronger,” he said.
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