Fiat retools Jeep as 500X SUV to show Chrysler merger is street ready

With the 500X, Fiat is making an important expansion into SUVs, with the brand's only offering being a re-badged version of the Dodge Journey. Photo credit: BLOOMBERG

PARIS -- With the new pint-sized Fiat 500X, CEO Sergio Marchionne wants to show his vision for Fiat Chrysler Automobiles NV is ready for the street.

The trendy Italian crossover model has a roundish front and curvy rear reminiscent of the iconic 500 subcompact, and yet it's essentially a clone of the rugged, boxy Jeep Renegade.

The two compact SUVs are largely the same under the surface, sharing engines, transmissions and other key components to cut costs. The two will be built on the same assembly line in Italy.

While the models have common underpinnings, "the 500X and Renegade are two very different cars," Marchionne said this week at the Paris auto show, where the Italian SUV debuted. The Fiat is a crossover, and "the Jeep is a Jeep."

With the merged entity's shares to start trading on the New York Stock Exchange on Oct. 13, the Jeep Renegade and the Fiat 500X are crucial for Marchionne to prove that the combination of Fiat and Chrysler -- two regional carmakers with a recent history of financial struggles -- can compete with larger global rivals like Volkswagen AG and General Motors Co.

The latest member of the 500 family, which follows the 500L wagon, is especially important to halt losses and sliding market share at Fiat's operations in Europe. It also marks an important expansion into SUVs, with the brand's only offering being a re-badged version of the Dodge Journey.

Smaller sister

"The 500X has the cute appeal of its smaller sister, and it's going into a booming segment" in the Turin, Italy-based company's home region, said Ian Fletcher, an analyst with IHS Automotive in London. "It will also be a good alternative in the U.S. for customers who want a five-door 500."

Sales of compact SUVs like Nissan Motor Co.'s Juke have been surging in recent years and are forecast to jump 30 percent to 1.95 million vehicles worldwide in 2014, IHS estimates.

Fiat's namesake brand could sorely use the boost. Its market share in Europe slumped to 3.8 percent in August, smaller than luxury marques BMW, Audi and Mercedes-Benz.

During a six-year slump in the European car market that led to a two-decade low last year, Fiat halted investment at the brand to save cash and focus resources on the turnaround of Chrysler.

The strategy left plants in Italy underused, leading to furloughs of thousands of line workers. Fiat's merger with its U.S. unit pools the American carmaker's cash with that of its Italian parent, providing more firepower for spending in Europe.

The Fiat 500X crossover has a roundish front and curvy rear reminiscent of the iconic 500 subcompact, and yet it's essentially a clone of the rugged, boxy Jeep Renegade. Photo credit: BLOOMBERG

Alfa Romeo

Part of Marchionne's 55 billion-euro ($70 billion) expansion plan for Fiat Chrysler is to bring Italian employees back to work as models with potential global appeal like the urban-focused Jeep Renegade, as well as new Alfa Romeo and Maserati cars, roll off assembly lines in the country.

His plan to share underpinnings among different brands mimics the strategy that has made VW the world's second-largest carmaker. IHS forecasts that Fiat will sell 73,000 of the tiny SUV next year -- the 500X goes on sale later this year in Europe and early next year in the U.S.

That could climb to 97,000 cars in 2016, helping the group's global deliveries rise to 4.76 million, a 10 percent gain from last year. That's still well below the CEO's goal of selling 7 million cars by 2018, and his job has gotten tougher as Europe's market recovery slows.

The Jeep Renegade.

Calling bluff

Auto sales in the region grew 1.8 percent in August, the smallest increase this year. Deliveries in the fourth quarter are forecast to decline 0.3 percent, IHS estimates. Europe's slowing recovery comes after the market tumbled 23 percent from the 2007 peak to a two-decade low last year.

"The question is if the pre-crisis level will ever be reached again," Martin Winterkorn, CEO of Volkswagen AG, the region's biggest automaker, said in a Sept. 25 interview with German broadcaster N-TV.

Alongside the sluggish recovery in Europe, Brazilian demand is suffering from a struggling economy in Fiat's second-largest market.

And with a lack of large-scale operations in the China, that means the 500X needs to be more than a Jeep in an Italian suit to win over discerning European buyers, said Arndt Ellinghorst, head of automotive research at ISI Group in London.

"European competition is huge, so the 500X can't be just another rebadge," he said. "Europeans would call their bluff."

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