FCA makes room for greater pickup and SUV production at the expense of sedans

Fiat Chrysler’s CEO Sergio Marchionne confirmed Tuesday the next-generation of Ram 1500 pickups will be assembled at the Sterling Heights Assembly Plant, only 10 miles north of the truck’s current production location at the Warren Truck Assembly Plant in Detroit.

This move, scheduled to happen in early 2018, is part of FCA’s reallocation of capital toward building more pickups and SUVs, while looking to outsource production of the slow-selling Chrysler 200 and Dodge Dart sedans. The news comes from Marchionne during FCA’s first-quarter earning call.

The Warren Truck plant is slotted to build a family of Jeep SUVs, namely the Wagoneer and high-end Grand Wagoneer. Jeep will also assemble an upcoming compact crossover in Toluca, Mexico. This crossover is destined to replace the outdated Compass and Patriot models.

Thankfully for FCA employees and UAW members, Marchionne says jobs are secure. “I confirm now that the realignment of the footprint will yield an increase in manpower,” he said in the meeting. What’s more, Ram and Jeep dealerships will not experience any delay in vehicle availability. When talking about the production realignment, Marchionne said, “We ran the exercise with the view of not losing one unit of sales in Ram and one unit of sales in Jeep.”

Both Ram and Jeep are tremendously important for FCA. Jeep, for example, is experienced fantastic growth. Wrangler sales have been growing by nearly 20,000 units annually since 2011. Jeep sold an impressive 202,702 Wrangler JKs in 2015 alone.

While this is great news for Ram and Jeep fans, the Dart and 200 are being treated like redheaded step children. FCA is still searching for an automaker willing to partner in building the sedans. Marchionne is well known for his intense desire to foster a partnership between FCA and another automaker. This move with the 200 and Dart, it seems, is a largely scaled back version of his plan.

In a presentation titled “Confessions of a Capital Junkie” in 2015, Marchionne outlined how automakers could reduce overhead and costs by consolidating. While this might be true, other automakers and the automotive media largely condemned the plan citing the eventual lack of competition and a sterilization of vehicle models.

Marchionne’s plans for the 200 and Dart aside, it seems his decision to reallocate FCA’s attention to trucks and SUVs will be acted upon. Whether this is a smart move or not with oil prices in constant flux, has yet to be seen.

Continue reading for the full story.

Why it matters

FCA’s concentration on pickups and SUVs seems like a fantastic on the surface. The current market is calling for more crossovers and pickups are still outselling nearly every make and model of sedan in the U.S. Fuel prices are still cheap and the popularity of pickups as daily commuters continues to rise.

However, many industry analysts wonder if FCA is placing all its eggs in a single, gas-guzzling basket. A large shift in oil prices would render SUVs and pickups too expensive to drive for many, leading consumers to seek smaller, more fuel-efficient vehicles. If this happens, FCA will be left with dealerships full of relatively inefficient vehicles as buyers transition to hybrids or even fully electric vehicles.

Marchionne is right about pickups and SUVs being extremely popular these days, but it’s easy to imagine an end to inexpensive fuel. The U.S. has already experienced such disasters several times in the last century – the latest being less than a decade ago. Don’t get me wrong – I love full-size pickups and solid-axle Jeeps as much as anyone, but this move does seem somewhat shortsighted. It will certainly be interesting to see how FCA follows through on Marchionne’s desire to focus on the Ram and Jeep brands.

Ram 1500 Rebel

2015 Ram 1500 Rebel High Resolution Exterior
- image 610880

Read our full review on the Ram 1500 Rebel here.

Source: Automotive News

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