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Chrysler's Marchionne rethinks profit numbers

Fiat CEO Sergio Marchionne speaks to reporters after delivering his keynote address at the Financial Executives International conference, in Montreal, Friday, May 29, 2009.THE CANADIAN PRESS/Graham Hughes.

When Sergio Marchionne first looked at creating a global auto giant out of Fiat SpA and Chrysler, he figured the combined entity would need to sell six million vehicles annually to be competitive with the best in the world. Two years later, Mr. Marchionne believes the number may be higher.

"While I'm worrying about six million cars, Volkswagen is talking about seven [million] people are going up to 10 [million]" the auto maker's chief executive officer said. "You end up realizing how much the world moves while you try to set objectives. I think we may have to take a look at the number by the end of 2014 or earlier."

His comments came during a media roundtable at the North American International Auto Show in Detroit. Two years ago, the big question about Chrysler was its survival; last year, the focus was on whether it could meet the ambitious targets for sales and financial results that Mr. Marchionne set for the No. 3 Detroit company.

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Those 2010 targets were met and while there are no longer questions about Chrysler Group LLC's survival, the company is still in recovery mode.

Part of that recovery includes a boost in sales for Chrysler outside North America. That is expected to contribute to sales of four million vehicles for Fiat and Chrysler combined this year, and more than five million by 2012.

A small piece of the global growth includes Fiat entering China for what Mr. Marchionne calls "the first time in an effective way," by exporting the new Fiat 500 subcompact to the Asian country from Mexico.

Joint ventures that Fiat has lined up in China and Russia, two of the world's fastest-growing markets, will help, he added.

Fiat is the sales leader in Brazil, another country where sales are taking off and where it's in a battle with Volkswagen AG and General Motors Co.

Mr. Marchionne has not expressed a desire to turn Fiat and Chrysler into the world's largest auto maker, unlike Volkswagen, which has a goal of knocking Toyota Motor Corp. out of the No. 1 global spot by 2018.

Volkswagen sold seven million vehicles worldwide last year for the first time. Toyota had reached that figure by the end of November. Final results for most of the world's other auto makers will not be announced until later this month.

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While several other auto makers at this week's Detroit show introduced new small cars or new hybrids and electric vehicles, Chrysler did not. Instead it showed off the new 300 full-sized sedan.

"It does not mean we're neglecting these things," Mr. Marchionne said. For example, a new eight-speed transmission, which will improve fuel economy, will become available on the 300 later this year.

He believes improving the gasoline engine is still the best and most cost-effective way to boost fuel economy and reduce emissions.

Fiat will offer an electric version of its 500 next year, Mr. Marchionne said, but the cost of that technology in reducing emissions and fuel consumption exceeds the costs of improving existing engines.

Other costs are also rising, he noted, even as auto makers face the expense of meeting new targets on fuel economy set by the U.S. and Canadian governments. "We've added safety and content on these vehicles beyond what we've been able to take out on the cost side," he said.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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