Image: Fiat 500
Carlos Osorio  /  AP
The back of a Fiat 500, foreground, is seen next to a Jeep Patriot Wednesday at the Chrysler Group LLC headquarters in Auburn Hills, Mich. Chrysler plans to revamp its struggling Dodge brand and will build a mid-size sedan for the North American market designed by Fiat SpA, the Italian automaker that now owns 35 percent of Chrysler.
updated 11/4/2009 1:38:43 PM ET 2009-11-04T18:38:43

Chrysler plans to overhaul its cars with technology from its new Italian partner, Fiat SpA, and says it has the cash to pay for it, helped by the U.S. government and lower costs.

CEO Sergio Marchionne, who also runs Fiat, began unveiling Chrysler's new five-year business plan on Wednesday. The plan includes new vehicles for the Chrysler, Jeep, Dodge and Ram brands, most based on Fiat's more efficient transmissions and small engines.

He said the troubled company's cash has grown by nearly $2 billion since it exited bankruptcy protection in June, and its operations broke even in September because of savings from job cuts and factory closings by the prior owner and through combining Chrysler and Fiat's operations.

But future growth hinges on offering better cars. The company's mid-sized sedans, the Dodge Avenger and Chrysler Sebring, along with many other models, have flopped. Chrysler said it will update these cars to make them more comfortable and quieter, then replace them in 2012 with Fiat designs. That could make Chrysler competitive in the largest part of the U.S. car market.

Besides the midsize car, Chrysler will introduce four new Dodges by 2013. They include a seven-passenger crossover vehicle, a mini-car and a compact.

Ralph Gilles, the company's chief designer, said the Dodge brand will have crisp handling, be quieter, more fuel-efficient and have more luxurious interiors.

The Chrysler brand also will get six new vehicles, including a Fiat small car and a new mid-size crossover in 2013. The automaker is also considering adding a mid-size pickup to its Ram truck lineup.

The company plans to lower sticker prices to boost sales and generate more cash as it fixes its struggling lineup.

Doug Betts, senior vice president of quality, said that work is under way to tackle quality problems, too.

"We get it," he said. "We're not in denial related to the public record for quality for Chrysler."

Aaron Bragman, an auto analyst with IHS Global Insight, said there were many questions remaining, including what the vehicles will look like and how Chrysler will pay for such a major turnaround. Marchionne has said Fiat wouldn't contribute any of its own money to Chrysler.

"I want to see if the vehicles they'll be producing two years from now are going to resonate," Bragman said.

It will be tough to win back car buyers, who are skeptical of Chrysler's quality. The automaker's sales are down sharply this year as buyers flee to other brands and a weak U.S. economy curbs demand for autos. Chrysler lost upward of $8 billion last year and would have run out of cash without government help.

Marchionne's Fiat, which now owns 20 percent of Chrysler with an opportunity for more, was put in charge of rescuing the 84-year-old automaker by the U.S. government, which so far has provided roughly $15 billion in aid.

Chrysler is also depending on a recovery in U.S. sales and a jump in market share. It expects auto industry sales of 10.5 million vehicles in 2010 to rise to 14.5 million in 2014, and that its share can jump from 9 percent this year to 13 percent in 2014. It also expects its global sales to more than double to 2.8 million in 2014 from 1.3 million this year.

Chief Financial Officer Richard Palmer said the company aims to pay back government loans by the end of 2014.

He also expects Chrysler to break even in 2010 and report an operating profit of $5 billion in 2014.

Chrysler's had $5.7 billion in cash at the end of September, up $1.7 billion since June. As recently as December, though, the automaker was practically out of cash.

Joe Veltri, Chrysler's product development chief, said he has a lot more funding to revamp products and create new ones. Chrysler can go to a cupboard of Fiat technology to develop new products, a vast difference from Chrysler's prior owner, Cerberus Capital Management LP, which was not a manufacturer but a private equity firm.

"We have far more tools to work with," he said.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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