"Chrysler and Fiat have become inextricably intertwined," Sergio Marchionne, who is now the CEO of both Fiat and Chrysler, told a key briefing of analysts and the media yesterday. "The work that we have done in the last five months has widened the scope of cooperation." The Fiat 500 will hit the U.S. showrooms next year and during the five year plan there will be a gradual roll-out of the derivatives of the award-winning small car with the 500C (cabriolet) arriving in 2011 and the high-performance Abarth 500 model a year later. Doug Betts, Chrysler Group's Head of Quality, spelled out efforts to improve Chrysler's dismal quality ratings, saying: "We are not in denial." Photo: New Dodge Caliber interior rolled out at the Frankfurt IAA in September.

Chrysler Group has finally outlined its plans to rebuild itself since emerging from bankruptcy in the summer, and targeting a doubling of sales within five years and a profit in two, while at the end of the plan cycle half of Chrysler's platforms and engines will be Fiat-sourced. "Chrysler and Fiat have become inextricably intertwined," Sergio Marchionne, who is now the CEO of both Fiat and Chrysler, told a key briefing of analysts and the media yesterday. "The work that we have done in the last five months has widened the scope of cooperation."

Propped up by US$12.5 billion in loans from the U.S. government the race is now on to secure a future for Chrysler, and under the five year plan announced yesterday 21 new models will be introduced. "The top priority is to invest to create a compelling brand and product offering," C. Robert Kidder, Chrysler's chairman told the audience. He added that after several months of work "the board's confidence that Chrysler will re-emerge as a strong competitor in the auto market is considerably stronger." Reaction from analysts to the five hour long meeting was mixed by Marchionne was upbeat that he can turnaround Chrysler Group in the way he did for Fiat. "This is the beginning of a new day," he said.

Fiat is ambitiously targeting an operating profit break for Chrysler Group by 2010, increasing steadily to US5 billion, or about 7 percent of net revenues by 2014. With a total operating profit of US$14 billion over plan period." Marchionne surprised the audience by saying that Chrysler had generated US$200 million in operating earnings in the third quarter. "Some of you have been [assuming] that we are losing money, this is not true," he said. "Most of you underestimated the substantial reduction in fixed costs that was carried out by the old Chrysler. The new Chrysler is being incredibly parsimonious." He added that Chrysler Group now had US$5.7 billion in cash in hand, up from the US$4 billion it held when it exited the bankruptcy procedure in June.

The average variable margin per unit will be stable throughout the plan with the implementation of "World Class Manufacturing" techniques and purchasing savings partially offset by price erosion and negative segment mix. Net income is being targeted at break-even in 2011, increasing to more than US$3 billion, or 5 percent of net revenues by 2014. Product spending (R&D and Capex) will average US$4.5 billion per year for the five years for a total of US$23 billion over the period (Capex is projected to come in at US$15 billion). Operating cash flow will become positive from 2011 and is set to generate over US$15 billion in plan period. Fiat also says that it will pay back the government TARP and EDC borrowing by 2014; as well as a Department of Energy yet-to-be-granted debt of US$2 billion by the end of the plan cycle. The plan also sees a two-year frame before the window opens for a flotation of Chrysler. The presentation stating that the "IPO to be decided by Board of Directors/Members, but highly unlikely to occur earlier than 2011."

During the five year plan Fiat is targeting Chrysler Group's combined North American market share (including the Fiat 500 and its derivatives set to arrive from 2010) to double from where it hovers now at under 6 percent to climb to around 13 percent. This will equate to a more than doubling of volumes from 1.3 million (estimated) this year to a projected 2.8 million in 2014 in a market that Fiat projects will rise to 14.5 million units a year from an estimated 10.5 million units this year. U.S. retail customers, where the highest margins are available, will account for the bulk of future sales, Fiat targeting increasing that slightly from 56 to 58 percent of all production while unprofitable fleet sales will slide from 15 to 12 percent. The overall Canadian and Mexican market shares' will both decline, from 12 to 8 percent for the former, and 6 to 4 percent for the latter. International sales will be the biggest focus, climbing from 11 to 18 percent thanks to a clear focus on the Jeep brand.

In volumes terms in the U.S. this would equate to a climb from 950,000 units this year, in Canada Chrysler Group would rise from 160,000 to 220,000 units, Mexico 80,000 to 120,000 units and internationally from 150,000 to half a million. Projected annual targets for the divisions by 2014 would see Jeep as the biggest winner with 800,000 units, Dodge and Chrysler on 600,000, Dodge Ram (trucks) on 400,000 and the Fiat 500 topping everything up with 100,000 units a year.

The withdrawal of the Chrysler and Dodge brands from international markets, the biggest news to be leaked prior to yesterday's briefing, was confirmed in by the international presentation slides given by Mike Manley. Since Dodge was launched in Europe and Asia three years ago overseas sales for the Chrysler Group have risen from below 7 percent of production during 2001-06 to a projected 10.7 percent this year, although this is due to the Group's sales collapsing faster in North American than outside the region as international sales have themselves plummeted from 238,000 two years ago to an estimate of around 144,000 this year. Jeep will be the only brand to get a full international focus although the new Ram trucks unit as well as a few models, such as Chrysler's 300 series and Voyager (the overseas name for the Town & Country minivan) along with Dodge's Journey, could be sold in selected markets as speciality models on a case-by case basis.

The shift towards building smaller cars was also emphasised, currently the "large" and "full size" segments accounts for 19 and 36 percent of sales respectively, this dependence will sharply reduce to 14 and 28 percent by 2014, meaning that the segments combined, which currently account for more than half of all product (55 percent), will shrink their share to 42 percent by the end of the five-year period. Meanwhile into the void will come mid-size models, they will climb from 23 to 28 percent to equal the volumes of full-size cars, compact models will decline slightly from 21 to 19 percent, while small cars will rise from 1 to 7 percent and micro cars, which are not in the product portfolio at present, will rise to 4 percent by 2014. By 2014 Fiat architecture will underpin 44 percent of all platforms while Chrysler's own platforms (many of which are derived from Mercedes-Benz technology) will reduce from 100 percent to 56 percent.

The Fiat 500 will hit the U.S. showrooms next year and during the five year plan there will be a gradual roll-out of the derivatives of the award-winning small car with the 500C (cabriolet) arriving in 2011 and the high-performance Abarth 500 model a year later. Meanwhile the Alfa Romeo brand wasn't given a look in at the presentation and will be treated separately.