It’s been less than a year since the new Chrysler Group LLC emerged from a government-mandated bankruptcy and the company has made very little news thus far. Now run by Fiat and its former chief executive officer Sergio Marchionne, Chrysler is indebted to the U.S. and Canadian governments as well as the United Auto Workers’ union retiree health care trust, the Voluntary Employee Benefits Association, all of which are part owners of the company.

In November Chrysler announced an ambitious product plan that calls for Fiat architectures to begin infiltrating the lineup before the end of this year. Highlights include a new midsize sedan on a Fiat platform and all-new versions of the Chrysler 300, Jeep Grand Cherokee and Dodge Durango, all before the end of the year.

The midsize car, which will replace the unloved Chrysler Sebring/Dodge Avenger, is especially important. Chrysler’s other major need is a compact car to replace the Dodge Caliber. Fiat has the architectures to do it, but customers will have to wait longer on that one.

I sat down with Marchionne at Detroit’s North American International Auto Show in January. Marchionne, who turned around a struggling Fiat in the mid-2000s, must now do the same with Chrysler. Here is what he had to say about that challenge and the future of Chrysler.

Q: When you dug into Chrysler, did it appear that previous owner Cerberus Capital Management had cut back on product development?

A. What appeared to me was there was no clear idea of what the product portfolio would look like going forward. There was lack of clarity. There was uneven distribution of capital projects.

The biggest market segments in the United States are the C [midsize cars] and D [large luxury vehicles] segments. If you only have a dollar to spend that’s where you go spend it, especially if you’ve got products that are structurally not working.

The decision was made to invest elsewhere. So we developed a brand-new platform for the 300, a decision that took capital that may have been required elsewhere to go play in a different sandbox. Until you’re clear about where you need the money, where the money needs to be spent to ensure longterm survival – that part of it was substantially missing.

We’ve done all the reallocation. The 300 we have now. We’re going to launch it. God bless it. It’s a brand-new car. But we’re taking a lot more care now about developing the C and D architecture because that’s the future of the house.

Q: How will Chrysler and Dodge survive until you can build new midsize cars to replace the Chrysler Sebring/ Dodge Avenger?

A. We recognize the problems of the Sebring. We know that it’s not the most loved car by car enthusiasts. Until we actually deliver the new architecture, which is going to be this year, and effectively re-launch our D-segment presence, it’s going to be a difficult year. … The second half is going to benefit from all the product launches. ... I gotta be able to get to next Christmas. When we went to bankruptcy, it’s not as if the bankruptcy judge gave us 13 new architectures and six new models. He didn’t. He gave us what the old car company had.

Our attempt now is to use this period of time to rebuild the connection back to the customer. … The [new] advertising is designed to reconnect these brands to the marketplace, back to the customer. This is all going on while we’re rebuilding the architectures to drive the vehicles.

It’s not a miracle. It’s going to be a tough year. We told everybody on November the fourth, I’m confirming it today, that 2010 for us is a difficult transition year. But at least our strategy and our game plan are clear.

Q: How much Fiat engineering is going to go into the new midsize car?

A. The only thing we’re delivering to Chrysler is the basic platform. Everything from that point on, once we deliver it, is up to Chrysler. Having said this, it’s not an inconsequential amount of knowledge that’s being transferred. Without it, you can’t build the car. Once we have the architecture in house, then we can start peeling off the nameplates. The architecture is interesting because it’s capable of doing both the C and D segments. So it’s versatile and it will allow us to effectively cover half the American market.

[Author’s note: While the previous two answers could be read to indicate that the Sebring due later this year is all new, that is not the case. A heavily revised version of the existing Sebring will come this year and an all-new car based on a Fiat platform is scheduled for 2013. The architecture for that later model is being delivered to Chrysler engineers this year to begin developing the car due in 2013.]

Q: What are your plans for a B-segment [compact] car smaller than the Dodge Caliber?

A. That would have to come out of the Fiat fold. There’s no way we’re going to tool that up here. It’s too small of a segment.

It’s too price competitive. We’ve announced the fact that the brands will have a B segment. We have the architecture. The good thing about this is that we have alternative sites for production, globally.

Q: When do you see Chrysler’s sales figures rebounding?

A. The first half of 2010 is going to be more difficult than the second, simply because the product offering doesn’t start delivering until the second half. The first real viable, tangible evidence of this is going to be the Grand Cherokee in [quarter two], which is brand new. Then we’re going to see the Wrangler coming out with a significant update. I think there are 14 other interventions, most of which are significant enough to warrant almost a new product launch – that will come out in [quarter three] or [quarter four] this year.

We know what number we need to hit in 2010 as a number of cars sold in the United States. I need to sell 1,100,000 cars a year in the United States.

Q: How hard is it to keep your team focused with how far sales have declined?

A. I’ve done this before. I’ve had to clean up market share before. There’s nothing you can do but this. There’s no magic solution. You gotta go through the washing process. It’s cleansing.

Q: What is that process?

A. It’s to get rid of the wholesale mentality of the car company. This is not a battery shop. “By the way, I’ve got 10,000 extra AAAs. Can you take them and unload them through your discount network?” We make cars. They’ve got a brand and a nameplate associated with them. People buy them for different reasons than wholesale. This industry winded up being wholesale. I won’t wholesale the vehicle. I won’t turn this into a distribution machine because I know I can’t make money.

Q: What’s the strategy going forward?

A. It’s to take it down, clean it up and rebuild the market share based on the quality of the product and the reestablishment of the brand equity with which the customer can interface. By the way, that’s why Toyota sells cars; that’s why Honda sells them, why Ford sells them.

Q: Would you shut down plants again?

A. If I need to shut the industrial machine until I get that brand equity back, then it’s shut. Just idle [plants] until you get the volume back. It’s no use producing cars that people aren’t willing to pay [for]. I hate to be this crass, but I need to run this business to make money. I know some people find that offensive, but I need to make a buck.

Q: What happens to the Hemi V-8 in the next five years?

A. It’s going to continue to be part of the DNA of this house. It’s one of the great claims to fame that this house has. We need to continue to improve that engine, to improve its performance, mainly fuel consumption.

Q: How will you address the public’s concern that the company is government owned or union owned or foreign owned?

A. There’s a lot of foreign-owned corporations in the United States which are quite functional and produce products that Americans buy. Not everything which is un-American is bad.

Those misconceptions as such are not true misconceptions. The VEBA trust [Voluntary Employee Benefits Association] is the majority shareholder of Chrysler. That was the deal. That’s how we got here. And that’s why it’s important that we execute flawlessly on this thing, we monetize this interest and give this back to the public markets. But it needs to be done intelligently and it needs to be done with evidence of the fact that this house can deliver. You can’t sell dreams.

That’s why we’ve been quiet; we’ve kept our head down. … I think we need to keep our head down and we need to execute and deliver. That’s the only thing that really matters. Everything else is irrelevant.

Q: If everything goes according to plan, when would you do an initial public offering?

A. If the markets are there, probably 2011.

Q: Why did you have a Lancia Delta with a Chrysler face in your booth at the Detroit auto show?

A. You may never get it. What we’re trying to test is America’s reaction to hatchbacks. That’s the bloody answer. I brought the car over because this is one of the most heated debates inside Chrysler today, as to whether hatchbacks of that size have a place in the U.S. market.

Q: Are you going to build an Alfa Romeo for North America?

A. We’re working with our people here to try and develop a business case. Alfa has historically been a drag on the resources of Fiat group. It’s never delivered on its objectives. Potentially, it’s a great brand. As you know it’s got a great history. There’s people that still talk about it now from the time of The Graduate. It will be decided within this year.

Q: You’ve said that turning around Fiat was tougher than Chrysler. Please explain.

A. First of all, Fiat is much bigger than Chrysler. Just in terms of the scope of operations … it was a lot more complicated. And secondly, I didn’t have the United States Treasury to cut me a check to try and keep me in business. It was me and Don Quixote, Sancho Panza and the windmills. At the end of the day, the collection of efforts that went on at Fiat were just – I can’t even begin to describe it.