Production shuffle to test Jeep’s durability in 2017
Following five consecutive years of record sales, the Jeep brand faces a challenging 2017 in continuing its trek to becoming a lead global brand for Fiat Chrysler Automobiles NV.
While the famed SUV brand will have 10 assembly plants in place in six countries once a relatively small plant in India comes online in May, its operations in North America are in the beginning stages of arguably its largest restructuring since civilian Jeeps started rolling off assembly lines after World War II.
The production shakeup for Jeep involves at least three plants and a handful of current and next-generation vehicles, including the all-new compact Compass and highly important Wrangler. The Jeep plans are in addition to the company retooling the Sterling Heights Assembly Plant to start producing the next-generation Ram 1500 pickup — scheduled to be unveiled in January 2018.
“It’s a complex series of moves,” global Jeep and Ram boss Mike Manley told The Detroit News this month at the North American International Auto Show in Detroit. “There’s no doubt on the industrial side it’s going to be a very challenging year.”
Jeep’s goal is to hit sales of 2 million vehicles globally by 2018. The brand reached a record 1.4 million sales in 2016.
If any of the launches or moves are delayed or botched, it could mean an end to Jeep’s global sales record and negatively impact the automaker’s profits. The importance of the expansion was underlined as Fiat Chrysler reported earnings last week of $1.9 billion.
“We have made all the industrial decisions that need to be made to make the ’18 numbers,” Fiat Chrysler CEO Sergio Marchionne told financial analysts and news media during a conference call Thursday. “Our objective here is to execute flawlessly on decisions that have been made now in the last three years.”
The 2018 targets include 9-billion euro ($9.63 billion) operating profit; 5 billion ($5.35 billion) euro net income and 5 billion euro net cash.
The company this month announced that Manley would no longer be chief operating officer of its Asia-Pacific operations to concentrate on the growth of Jeep and Ram brands he leads — particularly Jeep. Marchionne cited the company’s “unprecedented” production and product cadence as reasoning for the switch.
“The achievement of the 2018 plan depends in large part to the establishment of Jeep as the undisputed global leader in the SUV space, and Mike has been tasked with that objective,” Marchionne said at the time.
Jeep is the automaker’s most highly-coveted brand, consistently selling well domestically and demanding high premiums overseas in markets such as China, Europe and India. It has been on an aggressive global expansion since a five-year plan was outlined in May 2014 that included more than doubling Jeep sales and expanding production operations from four plants in the United States to 10 plants in six countries (U.S., Brazil, China, India, Italy and Mexico).
Changes to the company’s production domestically this year go as follows: Belvidere Assembly in Illinois stopped producing the compact Jeep Compass and Jeep Patriot models in December to make way for the mid-size Jeep Cherokee from Toledo Assembly-North. That plant is being retooled for the next-generation Jeep Wrangler, expected to begin production by year’s end.
A plant in Toluca, Mexico, is also now producing next-gen Jeep Compass models that are expected to hit domestic showrooms in numbers near the end of March. The vehicle replaces the current Compass and Patriot models.
Manley said the brand faces challenges every year and is just focusing on getting the launches right and meeting the goal of producing 2 million Jeep vehicles globally by 2018 — a mark that was set at 1.9 million but raised last year by Marchionne.
“You always have a challenging year when you’re moving production round ... there’s no doubt that is going to be an issue,” Manley said. “Our job really is to make sure that doesn’t impact us on the commercial side of the business, and I don’t think it will from the way the plans are in place at this moment and time.”
Globally, Jeep sold about 1.4 million vehicles in 2016: 348,000 Cherokees; 281,000 Grand Cherokees; 278,000 Renegades; 255,000 Compass/Patriots; and 237,000 Wranglers. The sales were a 13 percent increase from 2015. About 66 percent or 926,376 units were sold last year in the U.S.
Jeep has been able to somewhat cruise its way to five consecutive years of record global sales, driven by an increasing demand domestically for SUVs and incremental sales from new markets.
Jeep’s expected growth this year, for a sixth consecutive record year, will primarily come from overseas markets, Manley said. The launching of the all-new Compass will be key to its growth. The vehicle started selling recently in China and in Brazil, he said.
“We’ve got to now start getting the results from the investments we’ve made outside of the U.S., outside of North America,” Manley said. “That’s clearly going to be a very, very big focus for us.”
With global production in place and no new additions expected to the domestic Jeep lineup until the 2020 Jeep pickup, followed by the Wagoneer and Grand Wagoneer in 2020, sales in the United States are expected to be harder to boost.
“The growth won’t come from where it’s necessarily come from over the last two, three years but if you stand back and look at our footprint, you can see there’s a natural evolution in terms of where we’re going to grow,” Manley said.
Manley singled out China and Brazil as markets the brand particularly has to cash-in on. The automaker spent billions of dollars in recent years building new plants in both locations.
In a recent note to investors, John Murphy, lead U.S. auto analyst in equity research with Bank of America Merrill Lynch, said the Asia-Pacific region “remains one of FCA’s key growth opportunities, particularly as the Jeep manufacturing localization in China is completed.”
To assist in drumming up attention this year, Jeep will debut a new high-performance Jeep Grand Cherokee called the Trackhawk. The vehicle, as first reported by The News, is set to debut at the New York International Auto Show in April.
“It’s going to be very, very impressive,” Manley said, declining to comment on specifics of the SUV, which is rumored to be powered by a supercharged 6.2-liter V-8 engine that the Dodge brand has coined the Hellcat.
The company, Marchionne said Thursday, also is working on redesigning the Cherokee for next year.
The next-generation Wrangler also is expected to begin production in Toledo by November. Marchionne and Manley have commended the vehicle for staying true to its heritage, while advancing technologically and in capability.
The company, Manley said, is still determining when and where to unveil the next-generation Wrangler but it’s sounding more and more like it will be at a special event.
“If ever you were going to launch a vehicle outside of a show, Wrangler would be a clear contender for that,” Manley said. “We’re working through at the moment what we want to do.”