Major changes expected for Fiat Chrysler’s 5-year plan
Fiat Chrysler Automobiles NV CEO Sergio Marchionne will unveil a revised master plan on Wednesday that is expected to reshape the automaker’s vehicle portfolio and significantly shift manufacturing operations in the United States.
Industry experts from the Motor City and Wall Street to Italy expect the altered 2014-2018 plan to concentrate more heavily on Fiat Chrysler’s thriving Jeep brand and North American operations, while lowering expectations for the renaissance of Italian luxury brand Alfa Romeo and emerging markets such as Brazil.
“I would try to exploit, as much as I can, the Jeep brand,” said Andrea Balloni, a Fidentiis Equities SA analyst based in Italy. “Alfa Romeo is in its very early stages of revamping. It can be a success, it can be a failure. While for Jeep, you know that it is going to be a success.”
The company’s commitment to Jeep plays into a $5.3 billion U.S. investment plan by the automaker that was loosely outlined under a four-year deal with the United Auto Workers in 2015. Marchionne has confirmed parts of the plan, but not all. It is expected to impact a handful of vehicles and at least four U.S. assembly plants.
“We will, and we have, taken a hard look at the North American footprint,” Marchionne said earlier this month when announcing changes to its five-year plan would be announced Wednesday as part of its fourth-quarter and yearly earnings.
Ahead of announcing its financial results, Fiat Chrysler shares on the New York Stock Exchange closed Tuesday up 7.2 percent to $7.61 a share.
Marchionne on Jan. 11 said the automaker’s financial goals of a 9 billion euro operating profit and zero industrial debt (at 9.7 billion euros in 2013) remain intact under the new plan, but the road the company takes to get there has detoured from the original May 2014 plan.
“How we get there and the composition of that delivery is different than the way in which we envisioned it in 2014,” he said. “Markets have changed drastically.”
Negative market changes include a slowdown in China’s auto industry growth — particularly luxury imports where its Maserati brand plays — and a crisis in Brazil, where Fiat Chrysler opened a roughly $2 billion-$2.5 billion plant in 2015.
Positives include consumer demand for pickups and SUVs driving U.S. sales past expectations as well as the industry in Europe recovering faster than expected.
The 2014-2018 plan is the automaker’s second five-year plan since then-Italian automaker Fiat SpA took a minority stake in Chrysler Group LLC in 2009. The company also altered its first plan but industry onlookers expect significantly more changes to the current plan.
“The reality is building a car is hard and targets get missed,” said Stephanie Brinley, IHS Automotive senior analyst. “They’re not the only ones missing their internal targets for sure, but they made them public at that point because they needed to show the investor community a plan that would encourage investment in the company.”
Marchionne has mentioned several ideas for new products in recent months to help capitalize on its growing Ram Truck and Jeep brands in North America — from a Ram SUV (unconfirmed) to a Jeep Wrangler-based pickup (confirmed). He also confirmed the company plans to more heavily concentrate on vehicle electrification, which starts with the 2017 Chrysler Pacifica minivan later this year.
“The plug-in hybrid world is going to start slowly, slowly penetrating the whole portfolio that FCA has in the marketplace,” he said.
Marchionne also has mentioned a smaller Jeep than its subcompact Renegade for some markets as well as increasing Jeep’s sales expectations to more than 2 million by 2018, up from 1.9 million from the original plan. The SUV brand has recorded four consecutive years of record global sales, including more than 1.2 million in 2015.
Other expected detours from the original plan include keeping the Dodge Grand Caravan based on market demand through 2016, and production delays to several vehicles, including the Maserati Levante, Alfa Romeo Giulia, Jeep Grand Cherokee and others.
Production of the Dodge Viper remains up in the air, as there was no work promised for Fiat Chrysler’s Conner Avenue plant that produces the supercar after 2017.
Marchionne earlier this month hinted that the Viper “may eventually” re-emerge given the company’s access to other vehicle architectures.
Alfa Romeo is expected to experience some of the largest changes under the revised plan, according to analysts.
“The target was already very, very challenging in May 2014, and it’s almost impossible to be reached now because of the delays and the Chinese slowdown,” Balloni said. “It is not doable.”
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.
Balloni expects Fiat Chrysler to lower its sales expectations for Alfa to 200,000-250,000 vehicles by 2018.
Marchionne told reporters earlier this month that the plans will not impact on plant employment and “there are no plant closures that are envisioned,” but realignment is needed.
The Detroit News and several other media outlets in September reported that Fiat Chrysler would move nearly all domestic car production to Mexico, and fill the voids left on American assembly lines with more-profitable SUVs and pickups.
Under the plan production of the Ram 1500 pickup would move from the Warren Truck Assembly Plant 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, currently in Belvidere, Illinois, also would move to Mexico, one source said. The Illinois plant also makes the Jeep Compass and Jeep Patriot, but those vehicles are being phased out under the automaker’s previously announced five-year plan. The Jeep Cherokee, which Marchionne said would leave the Toledo Assembly Complex to make more room for the Jeep Wrangler, would move to Belvidere.
Marchionne declined to discuss all the details of the plan earlier this month, telling reporters everything “will become clearer” on Jan. 27.
“I remain optimistic about our ability to make the 2018 targets,” he said. “This remains the key objective of the group.”