Fiat Chrysler Automobiles NV CEO Sergio Marchionne revealed several changes to its North American production, which aims to shift production from cars to pickups and SUVs.
Marchionne on Tuesday confirmed reports of production of the Ram 1500 pickup moving from Warren Truck Assembly to Sterling Heights Assembly as well as announcing that the automaker will produce the successor to the Jeep Compass and Jeep Patriot — both now made in Belvidere, Illinois — at plants in Mexico and Brazil.
“We will see the whole U.S. manufacturing footprint fully loaded by the early part of ’18,” he said Tuesday morning during a conference call with reporters and financial analysts, adding the production restructuring is driven by “not losing one unit of sales” of Ram or Jeep vehicles.
Fiat Chrysler CFO Richard Palmer said the company’s plant in Toluca, Mexico, is expected to begin producing the new unnamed Jeep in the second half of the year.
Marchionne said the new Ram pickup will come out in early 2018. The Jeep Patriot/Compass replacement, he said, will go on sale in the United States in early 2017.
Marchionne reiterated that aside from temporary layoffs for retooling plants, North American employment will “yield an increase in manpower.” He said the company has had “intense” dialogue with United Auto Workers union officials about the impact to employment.
“I feel pretty good about what we’ve done,” he said. “There’s a lot of intense activity going on in the U.S. now.”
The next 18 months, Marchionne said, are “crucial” to reshaping its North American production away from cars to pickups and SUVs.
Warren Truck, Marchionne said, will be open as “an alternative site to expand production of Jeep products,” mentioning the Jeep Grand Wagoneer and Jeep Wagoneer — two SUVs mentioned by Marchionne earlier this year. He said the Warren plant would have needed “incredible surgery in order for it to accept a new Ram truck.”
Fiat Chrysler employs more than 9,500 people at the assembly plants in Sterling Heights and Warren as well as supporting stamping plants. It’s unknown when those plants will go down for retooling, and when the workers will be placed on temporary layoffs.
The company employs more than 4,200 workers in Belvidere.
UAW Local 1700 President Charles Bell, who represents workers at Sterling Heights Assembly, said the official announcement is that, “News definitely indicates Sterling Heights Assembly Plant and its workers have a very bright future.”
Bell added: “It’s great news, and it will provide relief to workers about the anxiety our membership has been experiencing. We still have some short-term concerns to get over.”
Those concerns include the company scheduling to cut a second shift at the facility in July, which will put roughly 1,420 workers at the plant and a supporting stamping plant on indefinite layoffs.
The production moves have been a discussion among workers and analysts since the automaker’s contract negotiations with the UAW last summer and fall. During that time, The Detroit News and several other outlets reported the company was shifting its North American production away from cars to pickups and SUVs.
According to those earlier reports, the Ram 1500 was expected to move to Sterling Heights; Jeep Cherokee production would move from Toledo Assembly Complex to Belvidere Assembly; and the Chrysler 200 at Sterling Heights as well as the Dodge Dart from Belvidere would move to Mexico.
However, the sedans are not bound for south of the border. Marchionne in January said the automaker plans to cease production of the Dodge Dart and Chrysler 200 sedans because of a “permanent shift” in tastes of buyers, who favor pickups, crossovers and SUVs.
“The whole purpose of the realignment is to not lose any production of Jeeps and Rams,” Palmer said on Tuesday.
Palmer also said the company is open to working with other automakers to make passenger cars, but declined to talk about any negotiations.
Marchionne earlier this year did confirm that production of the Jeep Cherokee would leave the Toledo Assembly Complex to make room for more production of the Jeep Wrangler, including a pickup model. He still has not said where the Cherokee would move, however Belvidere seems to be the best option.
The company, Palmer said, will experience “some volatility in working capital beyond normal because of the production realignment” in North America.
Marchionne said the production shift is a key element to the company meeting ambitious plans to become debt-free and to significantly increasing sales and profit margins by 2018.
North American operations will see a progressive improvement in margins, “As we de-emphasize the passenger car side and start rebuilding our position with the American plants of both SUVs and Ram,” he said on Tuesday.
Abandoning nearly all car production in the United States could be risky during an economic downturn or when gas prices spike — 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,” IHS Automotive senior analyst Stephanie Brinley previously told The News. “Certainly, drive that while you can, but it’s still a bit of a long-term risk putting all your eggs in one basket.”
Marchionne said he was “relatively confident” that if there were a decline in demand for SUVs and pickups in North America that the company can “compensate for that loss by continuing to fuel the international expansion of Jeep at the upper-end of the spectrum.”