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Published in Manufacturing
Fiat Chrysler Automobiles announced it will stop producing its own small sedans in favor of unlocking manufacturing capacity to build in-demand, high-margin SUVs and pickup trucks, such as the Ram Rebel. Fiat Chrysler Automobiles announced it will stop producing its own small sedans in favor of unlocking manufacturing capacity to build in-demand, high-margin SUVs and pickup trucks, such as the Ram Rebel. COURTESY PHOTO

Citing ‘permanent shift’ to trucks and SUVs, Fiat Chrysler bids adieu to small sedans

BY Sunday, February 07, 2016 11:32pm

While EV and hybrid sales continue to be a challenge in the era of sub-$2 per gallon gasoline, some automakers say the cheap gas has also forced them to re-evaluate their strategy for small sedans.

In particular, Fiat Chrysler Automobiles said in late January that it would stop making the shared-platform Dodge Dart and Chrysler 200 by 2017 so the manufacturing capacity can be used for in-demand trucks and SUV models.

Citing what he described as a “permanent shift” in the market, FCA CEO Sergio Marchionne told analysts in a quarterly conference call that the capacity the company had tied up in the Dart and 200 models will be repurposed to Ram and Jeep models. Going forward, FCA will “defocus from a manufacturing standpoint in the U.S. (on) the passenger car market.”

“There has been, in our view, a permanent shift towards (SUVs) and pickup trucks and we have seen, certainly in terms of our ability to meet market demand, some severe restriction in terms of the dexterity of our manufacturing system to accomplish that end,” he said.

Marchionne said the company currently cannot keep up with brisk demand for Ram pickup trucks and Jeep models like the Wrangler.

“We are running effectively nearly seven days a week with almost no shutdown at the Wrangler plant to try and satisfy demand and we’ve got nearly a similar arrangement in our truck plant,” Marchionne said. “We are structurally constrained in both pickup trucks and Wranglers and those are the single largest drivers of the shift in the manufacturing footprints in the U.S.”

While Fiat Chrysler will no longer make the small sedans, the company would look to contract with another as-yet-undetermined automaker to rebadge their existing platforms “and effectively provide us the product from their facilities that will allow us to continue to cover the market,” Marchionne said in the call with analysts.

Although FCA may give up some unit sales volume, Marchionne said the shift to a portfolio of higher-margin trucks and SUVs would be better for the company’s profitability.

FCA, which reported about $5.5 billion in “industrial debt” on its balance sheet, is the “only automaker with net debt” despite operating in an era of peak industry sales, according to a report in Automotive News.

The report noted the truck-and-SUV strategy shift also comes at a time when Marchionne’s attempts to find a buyer for FCA have been spurned continually by his ideal partner, General Motors.

Even if the strategy does not produce the indended results, it could position FCA to be a more attractive company for an acquisition, “especially for automakers that have been unsuccessful with SUVs and pickups in North America,” according to the report.

— Reported by Joe Boomgaard

Read 6578 times Last modified on Monday, 08 February 2016 13:52
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