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Jeep Is the Future of Fiat Chrysler, Once Again

Motor City Blogman

The only American brand certainty in bad economics and good is Jeep. Six-and-a-half years ago, when we weren’t certain that General Motors, Chrysler, and pretty much the rest of the U.S. auto industry would survive the Great Recession, we all knew someone would buy the brand that has survived Kaiser, AMC, Daimler Chrysler, and Cerberus.

Chrysler might try to unload Dodge trucks on someone such as Nissan, which had signed a deal to use the next Ram pickup’s platform for its own Titan truck (a deal made null by the Chrysler bankruptcy), and GM probably would get a few bucks from China’s SAIC for the Buick name. This was all the upside we could see at the time.

Almost seven years later, Jeep and Ram are the sole Fiat Chrysler brands that have a clear future. CEO Sergio Marchionne sees “a permanent shift to UVs [utility vehicles] and pickup trucks” in the North American market. The next Jeep Wrangler, which will use a lot of aluminum in its construction, will be available in hybrid and diesel versions, Marchionne said in the automaker’s fiscal year 2015 earnings conference call.

Don’t forget the upcoming Jeep Grand Wagoneer. Chrysler plans to compete with the Land Rover Range Rover with this new sport-utility vehicle, which ought to top even the popular Grand Cherokee for profit margin, each single sales of which, Marchionne said a few years ago, makes more money for Fiat Chrysler than 1,000 Fiats.

Once Alfa converts from tarted-up Fiats to mostly rear-wheel-drive BMW-fighters, it will be the premium car counterpart to Jeep’s premium SUV lineup. Now those new Alfa Romeos are on delay to allow FCA, which posted just $410 million in earnings for fiscal year 2015, a 40 percent drop from 2014, can concentrate on sure-fire moneymakers such as the Grand Wagoneer.

By contrast, the Dodge Dart and Chrysler 200 are on their last legs. FCA will stop building them, Marchionne said, to free up production facilities for utility vehicles. Marchionne said he’s interested in finding a partner to produce replacement Darts and 200s for Dodge and Chrysler, and Ford Motor Company CEO Mark Fields apparently is interested in such a deal.

Ultimately, FCA could become what we thought it might become seven years ago: the Jeep Motor Company. Alfa has a future if Marchionne can build it up from a couple of aged Fiat-based front-wheel-drive hatchbacks not sold here, a very low-volume sports car, and the upcoming Giulia. Dodge’s future depends on Alfa, which is to provide its RWD platform for the next Charger, Challenger, and a Barracuda convertible. Beside the lame-duck Dart, all Dodge has beyond that is the Journey (there will not be a new Grand Caravan), which has to be bargain-priced to sell in the same showrooms as Jeep models.

Chrysler is down to the 300 and the new Pacifica, the latter of which could extend the brand’s life for as long as minivans maintain some popularity with people who aren’t interested in SUVs.

Fiat is a regional brand in Europe that has had a modicum of success here (its sales were about three-quarters of Mini’s in the U.S. last year). Lancia is nothing more than a local Italian brand, and Maserati has some sort of future as a low-volume luxury brand with high profit margins.

Perhaps, under this worst case scenario, Maserati spins off and gets gobbled up by Ferrari. The rest of the remaining brands don’t get any more new product, and Chrysler, Dodge, Fiat, and even Alfa fade away like American Motors did when Chrysler bought it in the late 1980s to get Jeep and turned AMC into the Eagle brand.

What about a best case scenario? What if the Alfa Romeo Giulia is good enough to revive the brand? Meanwhile, Fiat Chrysler finds a partner, perhaps Ford, perhaps Nissan (which almost signed a contract to build Saturns for Roger Penske), or perhaps Mazda to assemble Dodge Dart and Chrysler 200 replacements.

Considering how fast compact and midsize sedans are giving way to smaller XUVs in this market, I can imagine one or two North American Fair Trade Agreement assembly plants spitting out several brands using a single platform, but with unique sheetmetal and interior designs. Think of the C- and D-segment sedans as our counterpart to the Japanese kei-car. Some 20 to 25 percent go straight to rental lots anyway. We don’t know whether we’ll need all these compact and midsize car choices in the future, but we do know we’ll need Jeep.

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