DETROIT (Bloomberg) -- After a disappointing return to the North American market following a 30-year hiatus, Fiat may get a boost with a new wagon version of its iconic 500 subcompact.
The Italian automaker, which also is the majority owner of Chrysler Group LLC, will introduce a five-door model "related" to its subcompact 500 at the Geneva motor show in March, said Olivier Francois, head of the Fiat brand.
The new model, he said, will be sold in the U.S starting next year. The company has a lot riding on the 500, inspired from the tiny 1950s original. Fiat sold almost 4 million 500s from 1957 to 1975, years when the model was as recognizable as Italian movie stars Sophia Loren and Gina Lollobrigida. Fiat has sold more than 770,000 of the model since bringing the redesigned version back to the market in Europe in 2007.
The new 500 was to have been CEO Sergio Marchionne's answer in the U.S. to the BMW Mini. The model's first year on the North American market went poorly. Only 26,000 cars were sold, about half the number forecasted by the company. That's thrown a wrench into Marchionne's strategy to craft a global auto group combining Fiat and Chrysler and increase revenue to more than 100 billion by 2014.
"We thought we were going to show up and just because of the fact people like gelato and pasta, people will buy it," Marchionne told reporters on Jan. 11. "This is nonsense."
Now the company is banking on a roomier version of the 500 -- as well as the high-performance Abarth derivative of the model, which goes on sale in North America this year -- to get the brand selling. The new wagon model is expected to be bigger and has been developed specifically for the U.S. market, said Dave Sullivan, a product analyst at AutoPacific Inc.
"There needs to be a reason for people to downsize and spend more for less other than fuel economy and good looks," Sullivan said in a phone interview. "Dealers would welcome with open arms something with more utility and space" than the 500.
AutoNation Inc. is betting that Fiat will replicate the success of BMW's Mini brand by opening four Fiat franchises and adding two more. The Florida-based retailer has owned Mini franchises since it debuted in the U.S. in 2002.
"Mini started with a product everybody said would never work," said Marc Cannon, a spokesman for AutoNation, Fiat's largest U.S. dealer. "They added more product, the pipeline was slowly built and now everybody wants Mini" dealerships.
Fiat expects to sell about 25,000 500s in the U.S. and as much as 40,000 cars in North America this year. The brand has 137 dealers open in the U.S. and will eventually have more than 150, Timothy Kuniskis, head of the Fiat brand in North America, said in an interview in Detroit.
In November he replaced Laura Soave, who had joined Chrysler in 2010 to reintroduce Fiat in the U.S. Fiat is also selling the American version of the model -- which is built in Mexico -- in China and Brazil.
"The dealers are very supportive," Kuniskis said. "We still have growth opportunities because we've got 12 states that don't have a single store."
Awareness of Fiat has grown thanks to Francois's ad campaign for the 500 featuring commercials with singer Jennifer Lopez, Kuniskis added.
The new Fiat five-door wagon, which will be built at the company's plant in Serbia, may have a 500 nameplate, said a person familiar with the plan, who declined to be named as a final decision hasn't been made. The model will come to market in Europe first.
Francois said it was too early to discuss the model's name. Francois said Fiat may need a third model to complete its offerings in North America. Fiat dealers will also sells Alfa Romeo cars from the end of 2013, when the sports-car maker plans its return to the U.S. market.
BMW reintroduced the retro-styled Mini hatchback in 2001 as an upscale compact to appeal to urban drivers and has since added variants including a coupe, a convertible and a wagon to broaden its appeal. BMW has expanded the Mini lineup to six models, with the addition this year of a two-seat roadster.
The carmaker retained the brand after unwinding its failed takeover of the U.K.'s Rover Group. The brand's U.S. sales increased to 57,500 last year from 24,590 in 2002, its first year, according to Autodata, a New Jersey-based researcher.
Even as Fiat missed sales targets last year and delayed the U.S. introduction of Alfa Romeo, the brand has increased its franchise count by about 30 percent in the past three months, said Mitch Phillips, global practice director at Urban Science, a Detroit-based dealer consultant.
"The dealer count has been stable," Phillips said in a phone interview. "There is a demand for those dealerships."
Fiat also wants to stem losses in Europe with sales of models related to 500, as well as its new subcompact Panda, after sales in its Italian home-market fell 14 percent last year to 506,020, according to the Italian transport ministry.
Marchionne, who acknowledged last April that he neglected European operations in favor of a U.S. turnaround, is now considering combining with another carmaker in the region to cut costs, share platforms and reduce the overcapacity issue as sales may remain flat until 2014.
"The real value of all this" would be in the small-car segments "where you could effectively unify the architectures," he said last week in Detroit. Fiat moved Panda production back to a less productive plant in Italy, near Naples, from a Polish factory as part of its investment plan for Italy.
The carmaker will begin airing a new commercial Jan. 22 showing its commitment to the country using philosopher Aristotle's motto, "The things we make, make us."
"We have to restore the brand equity of Fiat," Francois said. "Now clearly we have to re-establish the love relationship with Italians and their brand, as we did here" in the U.S. with Chrysler.