Fiat Chrysler Automobiles NV plans to cease production of the Dodge Dart and Chrysler 200 sedans under an updated business plan through 2018 that’s aimed at allowing increased production of SUVs and pickups in North America.
The shift, according to Fiat Chrysler CEO Sergio Marchionne, is due to changing tastes of buyers, who favor pickups, crossovers and SUVs. The company plans to use freed-up plant capacity to build more Ram Truck pickups and Jeeps.
“There has been, in our view, a permanent shift toward (utility vehicles) and pickup trucks,” Marchionne said Wednesday when announcing changes to the company’s 2014-18 business plan. “So one of the things that we’ve decided to do is to essentially de-focus, from a manufacturing standpoint in the U.S. … the passenger car market.”
He said the cars “will run their course” for the company to “withdraw the current 200 and Dodge Dart from the marketplace over a prolonged period of time.”
The company, according to Marchionne, is in continuing discussions with potential partners that could “provide a product from their facilities” to allow the company to cover gaps in the lineup left by the compact Dart and midsize 200. It’s unclear whether Fiat Chrysler would purchase re-badged cars or produce the cars using their current platform.
Fiat Chrysler has had trouble meeting demand for highly profitable Jeeps and Rams, while having to offer buyer incentives on its sedans to move the cars off lots.
The company did not give guidance on what plants will be affected, despite expectations. A company spokesperson declined to comment on additional details of the revamped production plan.
The company said the new plans can be executed with existing plant infrastructure and not negatively impact hourly employee headcount.
The Dart is built alongside the outgoing Jeep Compass and Jeep Patriot at Belvidere Assembly in Illinois. The 200 is produced at Sterling Heights Assembly. The company has made substantial investments at both facilities in recent years, including more than $1 billion in Sterling Heights.
Marchionne did not mention production of any other vehicles such as the Dodge Charger, Dodge Challenger or Chrysler 300 that are built in Ontario, or the Dodge Viper at Conner Avenue Assembly in Detroit. However, no vehicle was promised for the Detroit plant past 2017 under the United Auto Workers’ new four-year contract in 2015.
Having another automaker build cars for it is different than plans reported by media outlets in September that Fiat Chrysler would move nearly all domestic car production to Mexico.
Those reports said production of the Ram 1500 was expected to move from Warren Truck to the Sterling Heights Assembly Plant; production of the Chrysler 200 in Sterling Heights would go to Mexico; and the upcoming Jeep Grand Wagoneer would be built at Warren. Dodge Dart production also was expected to move to Mexico.
Marchionne earlier this month did confirm that production of the Jeep Cherokee would leave the Toledo Assembly Complex to make room for the Jeep Wrangler, including a pickup model. He has not said where the vehicle would move to, but it’s expected to go to Belvidere.
United Auto Workers Vice President Norwood Jewell, in a statement to The News, declined to comment on any changes because of a lack of specifics.
Abandoning nearly all car production in the United States could be risky during an economic downturn or when gas prices spike — times when consumers shift toward smaller, more fuel-efficient cars that cost less.
“SUVs and CUVs are hot. Jeep has really great brand recognition and it’s resonating with consumers,” said IHS Automotive senior analyst Stephanie Brinley. “Certainly drive that while you can, but it’s still a bit of a long-term risk putting all your eggs in one basket.”
In connection to shifts in production, Fiat Chrysler said it is increasing several financial targets as part of an update to its five-year business plan through 2018.
Target changes from the original May 2014 plan include net revenue of roughly 136 billion euros in 2018, up from 129 billion euros; operating profit (adjusted earnings before interest and taxes) of 8.7 billion-9.8 billion euros, up from 8.3 billion-9.4 billion euros; and adjusted net profit of 4.7 billion-5.5 billion euros, an increase from 4.5 billion-5.3 billion euros.
“We have been able to accomplish a lot in less than two years,” Marchionne told financial analysts and news media Wednesday. “We’ve upgraded guidance on all the key metrics.” Marchionne added that achieving the 2014 and 2015 goals outlined in the original plan “are not inconsequential.”
Positive gains contributing to the changes include financial gains from the spin-off of Ferrari; North American profit margins already at 2018 plan level; and stronger global performance for Jeep than anticipated. Market conditions also recovered more quickly in Europe than expected.
The increases may come as a surprise to some analysts, many of whom doubted the company could achieve the original targets.
“I was rather skeptical since 2014 on these numbers,” said Andrea Balloni, a Fidentiis Equities SA analyst based in Italy. “From here to 2018, I’m rather skeptical that they are going to meet this 9 billion of operating profits.”
Fiat Chrysler, as expected, released some revised product plans, including increasing production expectations of Jeeps from 1.9 million to 2 million, and reducing its product investment and focus on Alfa Romeo through 2018.
The planned product portfolio for Alfa Romeo under the new plan will be completed by mid-2020, with focus on Europe and North America. The presentation did not outline sales expectations for the famed luxury brand.
The original plan was to invest 5 billion euros ($6 billion) in Alfa for eight new models to spur sales from 74,000 in 2013 to 400,000 by 2018. The first of those products — the Giulia midsize sedan — is expected in dealership later this year after months of delays.
Marchionne reassured critics that the company is “well ahead of the curve” to meet aggressive upcoming U.S. fuel economy standards, thanks to a combination of “economically sound acquisitions” of greenhouse gas emission credits and new technologies.
The company’s first applications of a “mild hybrid” technology will be in 2018 on the Ram pickup, Marchionne said. The company’s first plug-in hybrid vehicle — the 2017 Chrysler Pacifica minivan — is due later this year.