Marchionne wants Fiat Chrysler to produce 6M cars a year

TURIN, Italy—Fiat and Chrysler CEO Sergio Marchionne said the merged company will be able to increase production to more than six million cars a year, a level he has long said is the minimum for an automaker to compete in the global market.

Marchionne aims to complete the legal merger of Fiat and Chrysler by the end of 2014 to create Fiat Chrysler Automobiles NV (FCA), the world’s seventh-largest automaker, and will outline a new multi-year business plan in Detroit in May.

“By 2018, Fiat will be able to make more than six million cars,” Marchionne told reporters after Fiat shareholders’ meeting. “I don’t want to give any details of the plan, but we are going in that direction.”

The carmakers delivered a combined 4.4 million cars last year, and Marchionne said they aim to sell 4.5 to 4.6 million this year, mostly on the strength of the American and Asian markets.

Marchionne had often cited the six million figure as a threshold automakers need to reach to be profitable in the increasingly crowded global market.

But he has shied away in recent years from forecasting that Fiat Chrysler might achieve that level as sales in Europe bottomed out in the economic crisis.

The CEO will detail the strategy for the automaker, including an update on his plans to raise production volumes in Fiat’s under-utilized Italian plants of higher-margin Maserati and Alfa Romeo vehicles for export.

The company is also likely to focus on boosting sales in China and Russia, high-growth markets where it lags behind competitors.

He said he believes the company can finance the five-year plan without selling assets or raising capital.

“We can run this by purely financing on debt,” Marchionne said.

Marchionne, who has been running Chrysler since it emerged from bankruptcy nearly five years ago, won a hard-fought deal to buy the last remaining stake in January, clearing the way for the merger.

FCA will have its legal headquarters in the Netherlands and fiscal headquarters in Britain.

Shares will be traded in New York and Milan.

Marchionne told shareholders it would be “disingenuous” if he did not recognize the emotional aspects of merging two automakers with distinct histories.

“The truth, however, is that our strength today derives from the union of these two realities, from the fact that each will conserve its own identity and will make available its own strong points,” Marchionne said.

As is customary at Fiat, individual shareholders in the company, many who have attended meetings for decades, were allotted five minutes each to address management.

Shareholder Giovanni Antonini asked if Fiat Chrysler would organize charters to Amsterdam to attend, saying “I would be sorry not to participate anymore.”

Marchionne’s response: No.

The CEO told shareholders that he is in talks with Russia’s largest bank, OAO Sberbank, on a joint venture to produce Jeeps in the first phase.

Fiat and Sberbank signed a letter of intent for the venture in 2012, but no progress has been announced.

He confirmed 2014 targets of US$128-billion in revenues for the combined automaker, with net profit at between US$827-million and US$1.1-billion.

Net industrial debt was forecast at between US$13.5- and US$14.2-billion.