Fiat tries to boost SUV share, with Chrysler's help

TURIN, Italy—Fiat SpA's plans for a midsize sport-utility-vehicle tailored for families with children marks its latest effort to expand in a market where its presence is still small.

The SUV, which will be based on the Dodge Journey of its U.S. partner Chrysler Group LLC, is the first model from Chrysler that Fiat has chosen for its namesake brand in Europe since forming its partnership with the company in 2009.

"We need to be present [in that market segment] and Chrysler is going to give us what we need [to do that]," Sergio Cravero, the Italian group's head of product planning, said in a recent interview.

Fiat will show off the new SUV at the Geneva motor show in March and bring it to market a few months later. It has yet to disclose its name or the price tag. Other Chrysler contributions to the Fiat group's portfolio to be shown in Geneva include the 300C and the Grand Voyager for the Lancia brand.

The midsize SUV market is attractive to Fiat because it offers wider profit margins than those it earns from its line-up of mostly small and compact cars. Larger vehicles are usually more profitable than small cars. The vehicle will compete with the likes of Volkswagen AG's Touareg model and the Pajero of Mitsubishi Motors Corp.

The Fiat brand has so far struggled to make an impression with larger family cars and is better known for small, city cars like the Panda or the Cinquecento.

"Fiat became very good at making small cars at the expense of weakening its ability to compete with bigger models," said Giorgio Elefante, a director at PricewaterhouseCoopers Advisory SpA in Italy.

For this reason, Fiat has had mixed results in widening the brand's product portfolio and has struggled to make a profit in Europe.

The Bravo, launched in 2007, came to be seen as a compact car for families with no children. "We did well in Italy," Mr. Cravero said. "We could have done better in terms of volumes abroad." The Sedici, a small SUV built for Fiat by Suzuki Motor Corp., has sold well but is too cramped for larger families.

The SUV segment's share of the overall European auto market is expected to grow as well, to 8.7% by 2014 from 8.5% in 2009, according to industry figures cited by Fiat. Of that market, Fiat hopes to increase its share of the European SUV market segment to 6.8% by 2014 from 1.6% in 2009, helped by SUVs under its Fiat, Alfa Romeo and Lancia brands, and more help from Chrysler.

Another SUV being sold by Fiat in Europe is the latest version of Chrysler's Jeep Grand Cherokee. The Grand Cherokee, however, won't be sold under a different nameplate as Fiat wants to safeguard the U.S. brand's identity and strong brand image.

The sale of the Grand Cherokee and the use of the Dodge Journey as a basis for a new Fiat SUV illustrates how the group wants to create economies of scale. Its tie-up with Chrysler enables it to widen its product offering without hefty investments to develop new vehicles.

The relationship between the two auto makers is designed to be mutually beneficial. Fiat wants to benefit from Chrysler's expertise in larger vehicles and is offering Chrysler its small-car expertise in return.

The latest example of this product-sharing push came last week when Fiat Chief Executive Sergio Marchionne said the group's luxury brand Maserati would come out with an SUV built on the underpinnings of the Grand Cherokee.

Mr. Marchionne is overseeing a massive restructuring of Chrysler, where he took the wheel in addition to his job at Fiat after the Detroit automaker emerged from government-orchestrated bankruptcy protection last year.