FCA’s Marchionne Confirms Jeep, Ram Production Moves
Alfa SUV on schedule, Dodge still developing RWD models
In 2018, Fiat Chrysler Automobiles will move production of an all-new Ram pickup truck into the Chrysler 200's Sterling Heights, Michigan, assembly plant and will launch Jeep Grand Wagoneer production in Ram's factory in nearby Warren, CEO Sergio Marchionne said in the automaker's investment analyst phone conference Tuesday. It's official confirmation of long-anticipated production shifts, but Marchionne used the call to convince analysts and reporters that FCA's expansion of truck and SUV production will not come at the expense of car production. The conference call came after FCA posted record quarterly adjusted net profit of 528 million euros -- the equivalent of $595 million -- based on April 26 exchange rates.
The company's debt also rose; from 5 billion euros [$5.7 billion] in the first quarter of 2015, to 6.6 billion euros [$7.5 billion] in the first quarter of '16, no doubt reflecting FCA's struggling development of new product and new electrified powertrains necessary to meet stricter fuel economy and emissions regulations.
The North American Free Trade Agreement-market realignment is designed "to not lose one unit of sales of Ram, not one unit of sales of Jeep," Marchionne said. The propensity of those net profits for the first quarter of 2016 come from Jeep, which continues to grow as a global brand, and Ram, which remains mainly a NAFTA-centric product.
Still, Marchionne bristled at a question in which an investment analyst suggested FCA's own estimates show that trucks and SUVs account for 83 to 84 percent of the company's business. The analyst's question: Can FCA become a 90-plus percent truck company?
"No, you're totally underestimating the minivan," Marchionne said, referring to the 2017 Chrysler Pacifica that will enter the NAFTA market in time for the May-June "minivan season."
When the analyst suggested that FCA's own materials include the Chrysler Pacifica and its predecessors as part of the truck/SUV lineup, Marchionne responded: "We may be using that concept on our website, and for that I apologize."
Clearly, though, FCA's future relies mostly on big pickups, sport/utility vehicles of all sizes, and capacious car-based minivans. Still, Marchionne should be a bit miffed that the business media are dismissing the Chrysler 200 and Dodge Dart as Dead Cars Rolling. Marchionne maintains that FCA will not assemble the two sedans when their product lifecycle is over, but that doesn't mean he won't continue to sell such cars (which could be renamed, after all), built by another manufacturer.
While business publications in particular seem to think Marchionne is simply killing off the 200 and Dart, it's pretty clear he'd like someone with the capacity to build the cars for him. Nissan, which nearly signed a deal with Roger Penske to build post-General Motors Saturns at the beginning of the decade, or some consortium that would buy and redevelop Mitsubishi's Normal, Illinois, factory (which was originally a joint venture with the old Chrysler Corporation) seem like potential candidates. Another candidate is Canada's Magna International, whose subsidiary, Magna Steyr, builds a number of models for various European automakers. Magna management has for a long time expressed interest in replicating the Magna Steyr manufacturing model in the NAFTA region.
Apart from a potential Dart replacement and the delayed second generation of the Journey crossover SUV, Dodge will continue to develop new models off a new rear-wheel-drive architecture, Marchionne said. That's Alfa Romeo's new RWD platform, though Marchionne didn't name it as such in this case, probably because the Alfa product cadence is in disarray.
Who knows? It may be more like Dodge sharing a RWD platform with Alfa, at this point. In the investment analyst conference call, Marchionne also noted that the Alfa Romeo Stelvio, a crossover SUV off the new RWD platform, is on schedule for a 2017 launch. But Marchionne did concede that FCA's car production in North America is on the wane: "When you look at production in NAFTA, will not represent a large portion of our mix."
Asked about order bookings for the Maserati Levante SUV, the FCA CEO refused to state any numbers, other than "they're quite strong. … That's all I'll tell you right now." He expects to begin delivering Levantes in the U.S. by the third quarter of this year.
"Have no doubt: There's zero unused capacity today in the Maserati plant."
So devoting a higher portion of global production to highly profitable, ever-popular SUVs and crossover SUVs seems to be paying off, if first-quarter results are any indication. Even if FCA's "truck" business in NAFTA doesn't quite equal 82 or 83 percent, Marchionne's giving in to Jeep, pickup, and minivan production as much as he can without eliminating cars completely.
This seems key to his quixotic quest for a corporate hookup. GM CEO Mary Barra dismissed the idea last year, and at this year's Beijing motor show Ford Motor Company CEO Mark Fields also ruled out a merger. Marchionne also has named Volkswagen Group - the company he once spurned when then-chief Ferdinand Piëch sought to buy out Alfa Romeo - and Toyota Motor Company.
But VW Group is spending too much money trying to survive Dieselgate right now, and Toyota seems happy to be, like Ford, minimalist in its brand proliferation strategy.
Of course, there's always Jeep. Everyone wants Jeep, the strong brand with expanding global aspirations that's on its seventh owner now (if you count each of the Chrysler iterations). The fear Marchionne must have is that if/when oil prices rise again and when there's another recession of any consequence, Jeep will become irresistible to any of these automakers, especially for a fraction of FCA's current value. For this reason, maintaining even a marginally profitable product lineup, which includes models that aren't Jeeps, trucks, and minivans seems critical to FCA's future as a full-line company.