Fiat-Chrysler expects new plant to boost Brazil profitability

The Jeep Renegade will be created in Brazil.

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March 7, 2014 – 4:18 am ET

GENEVA (Reuters) — Fiat Chrysler Automobiles expects a new plant in Brazil to boost its profitability in that market by 2017 soon after a minimize to subsidies and currency effects hit revenue there last year, CEO Sergio Marchionne stated.

“I’;m totally convinced that by 2017, which will be the first year of total production at the Pernambuco plant, we will return to producing double digit margins in Brazil,” Marchionne advised journalists at the Geneva auto display. He did not say whether or not the margins referred to earnings or income.

The Pernambuco plant, which will open following year, will generate versions that better match market demand, Marchionne has said. It will create the tiny Jeep Renegade and other designs. Production of the Renegade has already started out at a plant in Italy.

Brazil employed to account for about 1 fifth of Fiat revenue, assisting to offset losses in Europe, but an finish to automobile sales incentives, larger input costs and currency effects have weighed on profitability in the area.

FCA, created soon after Fiat took total handle of Chrysler in January in a $ 4.35 billion deal to create the world’;s 6th-largest auto group, minimize its 2014 revenue forecast soon after an 80-% slump in Latin American core earnings in the final quarter of 2013.

Individually, Marchionne mentioned he was optimistic about the market place recovery in Europe, but added he did not believe underlying difficulties of oversupply had been cured, and cuts in manufacturing were required for the recovery to gain momentum.

“Supply issues nevertheless carry on to be a huge issue in Europe and we’;ve only partially dealt with that,” he mentioned.

Marchionne expects a new approach focusing on large-finish automobile brands such as Maserati and Alfa Romeo for exports to assist override some of the weak demand in its classic markets, especially Italy. A new industrial plan outlining new models and investments will be presented in Might.

The carmaker expects to maintain the manufacturing of its sporty Alfa brand in Italy, Marchionne explained, incorporating that productivity at the Italian plants had improved tremendously and was on a par with other production internet sites in eastern Europe.

“It really is not a nationalistic thing, but there are some things that belong to a spot,” Marchionne mentioned, adding that, at least in his time as CEO, Alfas would be assembled in Italy. “Alfa Romeo belongs to Italy as Maserati and Ferrari do.”

Marchionne stated the first new Alfa to be designed beneath the new plan would be made prior to the finish of next year.

Financing choices

Marchionne explained a convertible bond remained amid FCA’;s choices to enhance capital and help fund the shift upmarket that will assist it break even in Europe by 2016. A selection on the bond or yet another choice could be announced with the Might strategy.

Fiat’;s financing has been a crucial concern between analysts who fear the group might struggle to uncover all the funds it wants to revamp idled plants in Italy and roll out a whole range of Alfa Romeos and Maseratis at the heart of its recovery plan.

“Whatever will come about (on the financing), it will happen soon after we’;ve finalized the merger, moved the listing to New York … so it will take until at least the 4th quarter if not right up until next 12 months,” Marchionne said.

The CEO reiterated a share problem was not possible in the existing market problems. Listing or selling components of its luxury brands Ferrari and Maserati would continue to be an choice for the future, but would not be part of the Could program, he added.

FCA strategies to listing the merged group in the United States as of October 1, but acknowledged it could be difficult to do so.

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