Fiat CEO Marchionne plans to hike Chrysler stake to 35 percent in 2 years, starting in 2010

Fiat CEO: Chrysler stake to 35 percent in 2 years

TURIN, Italy — Fiat CEO Sergio Marchionne said Friday the Italian automaker would increase its stake in Chrysler to 35 percent within two years.

The first 5 percent increment could come as early as this year after the Fiat 500 electric car is launched, Marchionne told shareholders at their annual meeting. The subsequent two purchases will depend on Chrysler’s distribution outside the United States, with the first linked to sales in Europe and the second depending on Latin America, he said.

“In the next 24 months maximum we must arrive at 35 percent of Chrysler,” Marchionne said. “The most important thing is that Chrysler is proceeding on a turnaround plan, the results are good.”

Marchionne also strongly defended Italy’s largest employer against criticism that it was abandoning its Italian roots through its alliances with Chrysler and other foreign partners.

“Fiat did not go abroad on a whim, and certainly did not go to forget Italy. We are there to make the company stronger,” Marchionne told shareholders. He said he found such criticism “unjust.”

Marchionne’s vision has been to make Fiat an international player strong enough to survive a shrinking market. Last year Fiat took a controlling 20-percent share in Chrysler LCC in exchange for small car technology and management. Fiat also has signed strategic partnerships with automakers in China and Russia to give it access to growing markets.

Fiat’s ambitions have created concerns in Italy that the automaker’s real plan is to shift production away from Italy — something Marchionne strongly denied.

A newspaper reported this week that Fiat planned to cut 5,000 jobs in Italy, slash the number of car models produced — plans that Marchionne has said do not exist. The automaker will present its five-year business plan April 21, and Marchionne said executives are still working on it.

Marchionne told shareholders that the company has not laid off workers despite the crisis that forced it to severely reduce production, instead putting workers on temporary layoffs for a total of 30 million hours, paid from a government-industry fund to which Fiat contributes. Fiat intends to increase auto production in Italy from 650,000 produced last year to 900,000 in three years, he said.

Marchionne said the decision to abandon auto production at its Sicilian plant is more than necessary due to its poor logistics, which add €1000 to the cost of every car. He also noted that Fiat plans to move production of the Panda, Europe’s top-selling auto, from Poland to its Naples plant, despite the hundreds of millions it will cost.

“We are doing it because, within the limits of possibility, and without endangering the solidity of our company, we maintain it is our duty to give priority to the country where Fiat has its roots,” he said.

That Naples plant has been hit hard by the crisis, producing just 36,000 cars last year out of a capacity of 240,000.

Marchionne also defended Fiat’s decision to return to paying shareholders dividends this year, saying shareholders have been the major source of capital for Fiat in the last 17 years and last year received no dividend.