Fiat Chrysler Automobiles (NASDAQOTH: FIATY) recently outlined an ambitious plan to become a leading automaker worldwide. CEO Sergio Marchionne intends to increase global sales by about 60% by 2019, and increase U.S. market share by 3.3%, largely through the expansion of the lineups of brands such as Jeep and Alfa-Romeo. The problem? Investors aren't buying in so far, with the stock plummeting more than 15% in the past week on fears that FCA won't be able to meet its lofty goals. Here is FCA's current position, as well as what to look for if the company is serious about increasing sales.

Will Ford's struggles help FCA?
Sales of FCA brands (Chrysler, Dodge, Jeep, Ram, Fiat) in North America nearly doubled from 2009 to 2013, and market share increased 6.5% in the U.S. across the same period. These gains show that FCA is ready to fight back hard against Ford (F -1.51%), which has led the American auto industry since the Great Recession. However, recent struggles have weakened Ford's position, and its CEO is likely on his way out after a successful tenure. Ford's domestic market share decline opens up a brief window for competition, which is where Chrysler must make its mark. Ford has a comparatively older product line, and FCA needs to move fast to capitalize on that, especially since Ford has finally reengineered its best-selling F-150. Based on the current situation, FCA has an opportunity to make an effect with aggressive expansion into the mainstream auto market. However, if Ford can drum up more sales in the next few quarters (as analysts predict), then FCA could be crowded out.

How far can jeep take FCA?
According to first-quarter numbers, there was a year-over-year market share increase of 1.1% for Chrysler, supported by a 46.5% increase in domestic Jeep sales in the first quarter alone. The international Jeep market is largely untapped, and if domestic Jeep sales are any indication it could be a powerful growth engine. New models are coming soon, and FCA hopes to grow international sales from 732,000 last year to 1.9 million in 2018. The Jeep lineup is giving FCA momentum, but it is not enough to carry the company to its sales goals.

Here's the problem
At least in America, FCA's sales goals are heavily reliant upon significant changes in strategy for its major brands. Alfa Romeo, which has never been sold in the United States, will receive 7 billion euros (5 billion allotted to North America alone) in an attempt to increase sales fourfold, including an ambitious projection of 150,000 units sold in America. This is the first hole in FCA's strategic plan; it is relying heavily upon the idea that "if you build it, they will come." As a general rule, an increase in supply does not create demand. It took Audi and Mercedes over 40 years to reach that volume of sales, so it's hard to expect Alfa Romeo's foray into an already crowded luxury market to be immediately successful.

On top of this, FCA plans to turn Chrysler into its mainstream brand, relegating Dodge to high-performance vehicles. This is a risky bet on the Chrysler brand. The goals for Dodge should be attainable, but by dropping vehicles such as the Caravan, FCA is placing all its chips on Chrysler. They appear to be ignoring the possibility that Caravan owners will switch to Chrysler rather than moving to competition. This move is a big "if" -- it could pay off, but it could also be disastrous.

What to watch for by brand

  • Jeep: Look out for an affordable and fuel-efficient SUV to complement the models currently available, especially in international markets. Jeep is not the problem, but there's always room for improvement.
  • Chrysler: This brand needs complete redesigns. They've finally admitted that they're not a luxury brand, which gives them room to develop a new line with new features.
  • Dodge: Performance must mean more than muscle. Dodge's new line must include fuel efficiency and style, and must not fall entirely out of the mainstream lest it go the way of Pontiac.
  • Alfa Romeo: Get the cars here now. This brand aims to directly compete with Audi, and the sooner the cars get here the better, especially considering that he U.S. auto market is forecast to slow down.
  • Maserati: Set base prices above the top price for Alfa Romeos; anything lower, and FCA will be competing with itself. If Alfa Romeo is going after Audi, then Maserati should be aiming for BMW, Mercedes, and Porsche.

Final thoughts
FCA has seen strong sales numbers, and has ambitious plans to increase them. However, at this point, there are more questions than answers. The five-year plan involves nearly $70 billion of capital, and it's unclear where that will come from (Marchionne nixed the idea of a Ferrari IPO).  Further, FCA is banking on expansions and changes that are by no means surefire wins. FCA could prove me wrong; there's an incredibly high upside to its projections. Even if the company doesn't meet its goals, it can still do well and show profits. The key is for investors to temper their expectations. There is no great risk, but a great reward likely is far from certain.