http://www.bloomberg.com/apps/news?p...d=a8TQ936VD6iM

By Mike Ramsey and Sara Gay Forden


Aug. 6 (Bloomberg) -- Chrysler Group LLC may retire the engineering used to make its iconic 300C sedan in favor of more modern architecture jointly developed with Fiat SpA, said two people familiar with the situation.

The so-called “LX” platform, which was used to produce more than 210,000 cars last year, would be replaced by a new structure that could also underpin a full-sized sedan for Fiat’s Alfa Romeo brand, said the people, who declined to be identified because a final decision hasn’t been made.

The project would be the first joint product by Chrysler and Fiat and would be the basis for the U.S. carmaker’s highest- volume vehicles as well as Alfa Romeo’s largest sedan. Sergio Marchionne, chief executive officer of both automakers, has said a company needs to build at least one million vehicles on a single platform to be profitable.

“It would be a major change to the platform, rather than an all-new platform.” said Stephanie Brinley, an analyst at AutoPacific in Troy, Michigan. Chrysler would likely start using the platform on all its new cars and Turin, Italy-based Fiat on its Alfa Romeos in 2012, while production of the Chrysler 300, Dodge Charger and Challenger would probably be switched over in 2014 or 2015, Brinley said.

“We’re in the process of defining the brands, defining the product portfolio,” said Rick Deneau, a Chrysler spokesman, declining to comment on the platform. A Fiat spokesman declined to comment.

‘Fly’ Ride

The 300C is Chrysler’s flagship passenger sedan. Los Angeles rapper Snoop Dogg in 2004 left a voice mail for then- Chrysler CEO Dieter Zetsche asking how he could get the car. The singer later made a television commercial playing golf with former Chrysler Chairman Lee Iacocca that featured the jingle, “If the ride is more fly, then you must buy.” Chrysler sold 62,352 of the cars in the U.S. last year and is introducing a revamped model in 2010.

Building a new platform can cost $1 billion or more, making it more cost-effective to assemble as many vehicles as possible off a single design because it lowers engineering and purchasing costs. The new platform, which would be with rear-wheel-drive, could be lighter and be made more flexible to accommodate difference sizes of vehicles, said John Buckland, an auto analyst with MF Global Securities in London.

“The more cars they can make on the same platform, the greater the savings,” said Buckland. “They need to design it also to save on manufacturing costs, allow flexibility for future models and let them share parts across the model ranges. All of this will help profitability.”

Ka on 500’s Platform

With different coverings, the same platform can be used to underpin various models. For example, Fiat’s Panda model shares the underlying engineering of the Fiat 500 and Ford Ka.

Chrysler and Fiat agreed to share technology and jointly develop platforms under a June 10 agreement that saved the Auburn Hills, Michigan-based maker of Dodge Ram trucks from bankruptcy and gave Fiat a 20 percent stake and management control.

It isn’t decided yet when work on the platform might begin or how the development costs would be shared, the people said.

The “LX” platform uses a Mercedes-Benz rear suspension and transmission and dates back to 2004. The vehicles made on it are built in Brampton, Ontario. The platform needs to be replaced because it is too heavy and doesn’t handle as well as newer structures, according to Andrew Close, an analyst with IHS Global Insight in London.

Relative Strengths

CEO Marchionne has said an agreement with Chrysler benefits both companies, with Fiat, more experienced in making smaller cars, exploiting Chrysler’s expertise in building larger models, and vice versa.

Fiat, which owns the Fiat, Alfa Romeo and Lancia brands in addition to Ferrari and Maserati, is studying how to round out Alfa Romeo’s product portfolio as it re-enters the U.S. market after more than 15 years.

The large Alfa Romeo sedan that would be built from the new platform developed with Chrysler would be in addition to a smaller Giulia model, still to be designed, that may lead the brand’s return to the U.S., according to the people.

Fiat rose 9 cents, or 1.1 percent, to 8.36 euros at the close of trading in Milan, giving the carmaker a market value of 10 billion euros.

To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net; Sara Gay Forden in Milan at sforden@bloomberg.net.

Last Updated: August 6, 2009 12:07 EDT