Chrysler Group LLC's turnaround plan will take 24 months to show some real results, the chief executive officer has said.

"My experience is that it can't be done in less than 24 months," Sergio Marchionne, the head of Chrysler and Fiat, who noted that it took him about two years to turn the Italian carmaker around.

"We'll try and do it faster. But by the end of 2011 and in early 2012, you should be able to tell how our plan is working."

The American carmaker's transformation will hinge on its strategic alliance with Fiat, Marchionne told AFP as he announced plans to build a fuel-efficient engine developed by Fiat in one of Chrysler's Michigan plants.

Those 1.4 litre engines will be exported to a Chrysler plant in Mexico for use in the North American version of the Fiat 500, Marchionne told reporters.

That Chrysler plant can build 100,000 units annually but it could be expanded to build more 500s if the demand is adequate, Marchionne said.

Half the production of the Toluca, Mexico plant will be shipped to Latin America - primarily Brazil [where the 500 is already on sale] - and the other half will be sold in the United States and Canada, he added.

"This is one more important step forward that demonstrates our intent to deliver on the promise of the Fiat-Chrysler strategic alliance and the substance of the road map we laid out in November," Marchionne said.

Chrysler is paying only for re-tooling the plant. The research and development costs were covered completely by Fiat, which introduced a European version of the engine earlier this year, he said.

Marchionne also explained that while Chrysler intends to repay its debt to the US government by 2014, it will not be repaying all the money it received.

The US$4bn debt Chrysler owed to the US Treasury before filing for bankruptcy protection at the end of April was extinguished during the proceedings, he said.

That money was used by Chrysler's previous owner, Ceberus Capital Management, to keep the company alive after auto sales collapsed last year.

The new Chrysler emerged from bankruptcy protection with a $7bn debt to the US Treasury, which Marchionne said will be fully repaid.

Marchionne also indicated he would eventually be looking for someone else to head the US automaker.

"I'm not going to work 24/7 forever," he told AFP.

Marchionne said the Chrysler board certainly would consider promoting from within but said he had not ruled out going outside the company or the industry.

"I think we have a terrific leadership team," he said.