MILAN (Reuters) - Fiat (>> Fiat SpA) will focus its strategy 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 boost its European operations and protect jobs, its chief executive said.

In an interview with Italian daily La Repubblica, Sergio Marchionne sought to appease unions and politicians who are worried that the merger with Chrysler could signal a shift away from its 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 repeated that selling Alfa Romeo to a competitor was out of the question. Volkswagen (>> Volkswagen AG) has repeatedly expressed an interest in the unit. "They can go dream about it," he said.

Marchionne said the merger would allow Fiat to channel investments into Italy and help re-instate the thousands of workers on temporary layoff schemes.

"My pledge is: when the plan is fully operational, the Italian industrial network will be (fully utilised), market permitting, of course," he said. "With time - if the market does not collapse again - all (workers on temporary layoffs) will be reinstated."

Fiat will present a new industrial plan, outlining new investments and models, at the end of April, and Marchionne said Fiat could use a mandatory convertible bond as a way of financing that plan.

"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 in media reports. ($1 = 0.7361 euros)

(Reporting by Agnieszka Flak; Editing by Stephen Jewkes and David Holmes)

Stocks treated in this article : Fiat SpA, Volkswagen AG