Chrysler banking on Jeep to lead sales in Europe

AP News
Posted: Nov 16, 2011 2:32 PM
Chrysler banking on Jeep to lead sales in Europe

Chrysler is counting on a new Jeep sport utility vehicle and its strong brand name to help withstand uncertainty in the European auto market and expand into new markets in China and Russia, the automaker's chief executive said Wednesday.

The company announced plans to spend $500 million at its Ohio assembly complex that will make the new model and add 1,100 jobs by late 2013. The expansion is part of a $1.7 billion investment to build the new Jeep.

Chrysler CEO Sergio Marchionne said Jeep is becoming the star of its European market and that sales have been doubling.

"It's the best brand Chrysler owns by a long margin," he said. "It's got a glorious history."

Italian automaker Fiat SpA, which now controls Chrysler, has been hit hard this year by slumping overall sales in Europe. It has been turning more toward business in the United States and Brazil, said Marchionne, who is CEO of both companies.

He said next year will be even worse in Europe. "The majority of the growth and expectations around Fiat are unfortunately outside the European context," he said

Marchionne said that he's confident the leaders forming the Italy's new government can help it avoid financial disaster, but he added that instability there could influence where it locates its new headquarters when Fiat combines with Chrysler.

He is working toward bringing the two automakers together and faces the thorny political issue of where to base the company. The instability in Italy can't be overlooked, he said Wednesday.

"I would be lying to you if I told you it didn't," he said. "It's one of the things we'll look at. That's not to say the current situation would force us to move away from Italy. We're committed to the industrial back bone of the country."

Premier Mario Monti formed a new Italian government on Wednesday puts bankers, diplomats and business executives in charge instead of politicians. The former European Union competition commissioner said economic growth is a top priority and will put out an emergency plan Thursday

"Monti has all of the qualities to get this done," Marchionne said. "It's in the interest of every Italian to get behind him."

Whether the country can recover soon depends on its political forces, he said. "If they do, it can be done relatively quickly," he said. "The execution may take longer, but the plan can be put in place." `

Sales of the stylish Fiat 500 mini car have been far below expectations in the United States since its debut in March, Marchionne said. It's Fiat's first vehicle in the U.S. since it pulled out of the market in 1983.

He blamed the low sales on a lack of dealerships selling the Fiat and said more are coming on line.

While Fiat is struggling, Chrysler is moving toward its first annual profit since 2005 behind strong third quarter sales of its new or revamped Chrysler, Dodge, Jeep and Ram cars and trucks.

Marchionne thinks the Jeep brand can continue to grow worldwide behind its unique history. Originally made for the military, workers in Toledo have been producing Jeeps since 1941.

"The horrible thing about Jeep is it hasn't been exploited internationally," he said. "It's off-road capabilities are unique in the marketplace and we need to preserve that going forward."

No decision has been made on what the new model will be called. Marchionne said it will be more technologically advanced than the Jeep Grand Cherokee.

The assembly plant in Ohio that now has 1,800 workers makes the Jeep Wrangler and Liberty along with the Dodge Nitro and will be central to the company's future and its SUV exports, Marchionne said.

It's likely the plant will build more vehicles in the coming years, he said. He also didn't rule out expanding Wrangler production at the plant if sales take off outside the U.S.