* Says merged entity will be listed "where the money is"
* Says mandatory convertible an option to fund investments
* Sees Italy factories fully utilised, workers reinstated
By Agnieszka Flak
MILAN, Jan 10 (Reuters) - Fiat will focus on revamping its Alfa Romeo brand after its planned merger with Chrysler and will keep production of the marque in Italy as it seeks to revive its European operations and protect jobs, its chief executive said on Friday.
In an interview with Italian daily La Repubblica, Sergio Marchionne sought to reassure unions and politicians worried the merger with U.S. group Chrysler could signal a shift away from the firm's home market, where Fiat was founded 115 years ago.
"Just as the Jeep is sold in the whole world but is American to the bone, so Alfa's DNA has to be authentically all Italian," he said. "It will indeed remain at home."
Marchionne is betting on the sporty Alfa brand because he believes it can deliver the global profile that the mass-market Fiat brand cannot and far greater sales volumes than top-end Maseratis, but the strategy has so far been met with scepticism.
Fiat acquired the Alfa brand in 1986 and has since failed to revive it despite repeated attempts.
In the first interview since striking a landmark $4.35 billion deal to gain full control of Chrysler, Marchionne said a potential move of the group's listing or headquarters outside Italy was symbolic and did not mean production would be moved.
Italy's coalition government, desperately trying to protect jobs, has been closely watching the merger talks for any signs that Fiat could further diminish its presence in the country.
The carmaker employs around 62,000 people in Italy, where unemployment is running at a 37-year record of 12.7 percent.
Marchionne said the merged Fiat-Chrysler would be listed where access to capital was easier. Sources close to Fiat told Reuters last week that a primary listing in New York was most likely.
"We will go where the money is," Marchionne said. "There is no doubt that the most liquid market is the American one, the one in New York, but the board will decide. I am also willing to go to Hong Kong."
Marchionne repeated that selling Alfa Romeo to a competitor was out of the question. Volkswagen has repeatedly expressed an interest in the unit.
"They can go dream about it," he said.
Marchionne said the Chrysler deal would allow Fiat to channel investments into underutilised Italian plants and help reinstate the thousands of workers on temporary layoff schemes.
"My pledge is: when the plan is fully operational, the Italian industrial network will be used to the full, market permitting," he said. "With time - if the market does not collapse again - all (workers on temporary layoffs) will be reinstated."
In the mass market, Fiat will focus on developing models within the Panda and 500 families, and exit the low and medium segment of the market, Marchionne said. Lancia will become a brand for the Italian market only, he added.
Beyond a planned Maserati sport utility vehicle (SUV), Fiat would build "something else" at its Mirafiori plant in northern Italy, Marchionne said, without giving details.
While its Melfi factory is gearing up to produce the Fiat 500X and the Baby Jeep, at Pomigliano the company will continue making the Fiat Panda and "maybe a second vehicle", Marchionne said, adding that he saw the Cassino facility between Rome and Naples as the most suitable for an Alfa Romeo relaunch.
Fiat will present a new industrial plan, outlining new investments and models, at the end of April, and Marchionne said it could use a mandatory convertible bond to help finance it.
"A mandatory convertible bond could be an appropriate measure," he said. He would not comment on a potential 1.5 billion euro ($2 billion) size for the bond mentioned by media.
He dismissed market concerns about Fiat's liquidity situation after the Chrysler deal and rising debt.
"One needs to see where our debt position will be after the April plan on new models. I am not at all worried," he said.
At 1020 GMT, Fiat shares were down 0.4 percent, lagging a small rise in the the European car index.