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Old 01-28-2016, 08:32 AM   #1
XDCX
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Default FCA's Updated Business Plan - 2016

I'm a bit compressed for time at the moment so I haven't fully studied FCA's updated business plan for 2016.

I did read a quick story in The Detroit Free Press that provide a nice recap of what's known and what's not known. Here's a link to the report - click here

Here's an excerpt of what's not known about FCA's future at the moment:

  • Where the next generation Jeep Cherokee will be built. (Various reports suggest Belvidere, Ill.)
  • Where the next generation Ram pickup will be built. (Various reports suggest Sterling Heights Assembly.)
  • When production of the Dodge Dart and Chrysler 200 will end.
  • If FCA will be able to reach an agreement with another manufacturer to build passenger cars to replace the Dodge Dart and Chrysler 200.
  • What will happen to Dundee Engine, which makes engines for the Dodge Dart, the Chrysler 200 and other vehicles.
  • What the "Wagoneer family" will be. Marchionne made comments about the "Wagoneer family" and mentioned the "Grand Wagoneer" and the "Wagoneer." It's unclear what this means. Before Wednesday, the company had only confirmed plans for one large Jeep Grand Wagoneer SUV.
  • Without the Chrysler 200, what is the fate of the Chrysler brand, which already has been reduced to just three models -- the 200, 300 and Chrysler Town & Country (soon to be Pacifica) minivan.
.

Last edited by XDCX; 01-28-2016 at 08:37 AM. Reason: Changed Detroit Times to Detroit Free Press
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Old 01-28-2016, 08:35 AM   #2
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Default The future of the Chrysler brand....

At one time I remember thinking that it was almost a certainty that the Dodge brand would be killed off and then that trend reversed itself.

Now it appears the Chrysler brand may be in the crosshairs....

Hard to imagine that FCA would want to kill off the Chrysler brand given the failure they've had in getting Fiat and Alfa Romeo established.
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Old 01-29-2016, 06:03 PM   #3
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I think much of this will come to fruition. The Cherokee going to Belvidere has been assumed since the UAW deal last year, same for the increase in Metro Detroit Ram production and possibly bringing small SUV like the Journey "home" from Toluca, but we will see what happens.

The only thing that I have a hard time wrapping my head around is dropping the Dart and 200. Are they perfect vehicles in the segment? Heck no. Is market and registration where it needs to be on these models? Nope, except maybe in lease-heavy markets, but even Chrysler Capital and Ally learned their lessons on the Dart and have totally dropped the lease program over the last 18 months.

But to concede an entire segment to the competition? No it's not even a question of if the Mitsubishi Lancer or Dodge Dart is the 'better' car in the battle of the "most mediocre midsizer." We will just concede what little share we have to everyone else.

I know, gas prices are low and everyone is trending back toward SUVs and pickups. This is fine -- it has happened before when energy prices are low, but this puts FCA in a very precarious position if we see an near-overnight doubling in gas prices as we did in April and May of 2008.

A knee-jerk reaction will everyone rush to 'trade down.' We've been there before. We will be there again. FCA dealers have probably felt it more than anyone. It led the Cerberus-era Chrysler Group LLC to bankruptcy, near extinction, and guaranteed extinction for 789 dealerships, including our Jeep-only point.

Fiat was supposed to bring its small car expertise to the table in this marriage. They certainly have. The Dart is a huge step from the Caliber and the and the UF body 200 is a huge step from the JS body Sebring and 200. Why would we give up on those improvements now? Especially after huge investment in SHAP for the production of the UF 200 in 2014.

Our only 4-door sedans will be the Charger and 300. Granted, pricing largely overlaps the current 200, but only in rear-wheel drive packages. Even an AWD Charger SE has an MSRP of $32k+ with no options.

We will see what happens. At the end of the day, with cheap gas, SUV and truck craziness right now, the discontinuation of the Dart and 200 product lines will not even put a dent in most of our pocketbooks. Combined, they are less than 5% of my store's volume. But what will happen if there is another 2008?

I don't know if counting on a partner to source small cars is the best solution either. It is definitely possible, but why partner with someone else when the investment has already been made in WCM facilities in the US? How much more will it cost to retool SHAP for something else when you consider $1B was just spent a few years back.

It will be interesting to see how things pan out, but it looks like Fiat's small car expertise in this joint company is giving way to salivating corporate folk looking at the prospects of Jeep and truck profits.
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Old 02-01-2016, 08:13 AM   #4
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getting Fiat and Alfa Romeo established.
That may never happen.
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Old 02-03-2016, 11:22 AM   #5
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Originally Posted by mryan55 View Post
I think much of this will come to fruition. The Cherokee going to Belvidere has been assumed since the UAW deal last year, same for the increase in Metro Detroit Ram production and possibly bringing small SUV like the Journey "home" from Toluca, but we will see what happens.

The only thing that I have a hard time wrapping my head around is dropping the Dart and 200. Are they perfect vehicles in the segment? Heck no. Is market and registration where it needs to be on these models? Nope, except maybe in lease-heavy markets, but even Chrysler Capital and Ally learned their lessons on the Dart and have totally dropped the lease program over the last 18 months.

But to concede an entire segment to the competition? No it's not even a question of if the Mitsubishi Lancer or Dodge Dart is the 'better' car in the battle of the "most mediocre midsizer." We will just concede what little share we have to everyone else.

I know, gas prices are low and everyone is trending back toward SUVs and pickups. This is fine -- it has happened before when energy prices are low, but this puts FCA in a very precarious position if we see an near-overnight doubling in gas prices as we did in April and May of 2008.

A knee-jerk reaction will everyone rush to 'trade down.' We've been there before. We will be there again. FCA dealers have probably felt it more than anyone. It led the Cerberus-era Chrysler Group LLC to bankruptcy, near extinction, and guaranteed extinction for 789 dealerships, including our Jeep-only point.

Fiat was supposed to bring its small car expertise to the table in this marriage. They certainly have. The Dart is a huge step from the Caliber and the and the UF body 200 is a huge step from the JS body Sebring and 200. Why would we give up on those improvements now? Especially after huge investment in SHAP for the production of the UF 200 in 2014.

Our only 4-door sedans will be the Charger and 300. Granted, pricing largely overlaps the current 200, but only in rear-wheel drive packages. Even an AWD Charger SE has an MSRP of $32k+ with no options.

We will see what happens. At the end of the day, with cheap gas, SUV and truck craziness right now, the discontinuation of the Dart and 200 product lines will not even put a dent in most of our pocketbooks. Combined, they are less than 5% of my store's volume. But what will happen if there is another 2008?

I don't know if counting on a partner to source small cars is the best solution either. It is definitely possible, but why partner with someone else when the investment has already been made in WCM facilities in the US? How much more will it cost to retool SHAP for something else when you consider $1B was just spent a few years back.

It will be interesting to see how things pan out, but it looks like Fiat's small car expertise in this joint company is giving way to salivating corporate folk looking at the prospects of Jeep and truck profits.
Thanks for a great post - I agree with your insights.

Concerning the Dart and the 200 it seems to me that FCA is already so heavily invested in those two vehicles that the "incremental cost" to build them has to be dirt cheap. If FCA essentially values the R&D, tooling, plant set-up, etc. at zero then the "incremental cost" to building the next Dart or 200 is just the material and labor. It's hard for me to imagine that Marchione figures he can generate a larger bottom line by outsourcing that segment.

Additionally, what OEM would likely provide FCA with cars for this segment? It wouldn't be GM or Ford and it likely wouldn't be a Japanese OEM either so that only leaves Korea, India or perhaps China.

At this point the only way that dropping the Dart and the 200 might make sense is if Marchionne is still interested in finding a buyer and he's doing some house-cleaning to make the assets and performance of FCA look more attractive. It would be no different than a mega-dealer who might want to sell of some of his/her weaker stores before offering up his business for sale. (Stores with weak sales/margins/profits might pull down the value of the entire dealer group if they're being evaluated by prospective buyers.)
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Old 02-08-2016, 06:53 PM   #6
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I agree -- keeping Dart and 200 in production couldn't cost too much in the grand scheme of things considering the huge investments at Belvidere and Sterling Heights in the last 5 years.

However, if the best result for FCA comes from outsourcing, I guess I am OK with it to an extent. I just don't want to become super reliant on SUVs and light duty truck in the event we have a huge spike in gas prices in the future. If all small- and mid-size cars are cut they just can't be brought back in the snap of a finger if market conditions change.

If going outside FCA for small cars is the way to go, Sergio needs to find a partner who will build a car that is not currently available here in the US. This will be the hardest part, because who would FCA partner with? There's Peugeot, but with most other OEMs you will be running into exsiting alliances.

A natural choice would be Mitsubishi, but even their smallest offerings are available here, and the small-midsize option -- the Lancer -- isn't even close to class competitive.

Or perhaps Dart and 200 just stay in production but are built by a contract manufactuer like AM General in the US, Valmet in Finland or Magna Steyr in Austria. That would make sense, but it isn't a cheap plan. The only major contract manufacturing job in the last few years has been Daimler hooking up with AM General in Indiana to put the R-Class back in production for export to the Chinese market.

Back when smaller manufacturers were still around this was pretty commong. Saab had the 9-3 convertible built in Finland (1st generation) and Austria (2nd and 3rd generation) since the main line in Sweden was't flexible enough to build all 9-3 sedans, 9-5 sedans and 9-3 convertibles.

Again, in the volume that FCA will need I would guess that this would be more expensive than just keeping Belvidere or SHAP working as usual?
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Old 02-09-2016, 10:49 AM   #7
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Originally Posted by mryan55 View Post
If going outside FCA for small cars is the way to go, Sergio needs to find a partner who will build a car that is not currently available here in the US. This will be the hardest part, because who would FCA partner with? There's Peugeot, but with most other OEMs you will be running into exsiting alliances.

A natural choice would be Mitsubishi, but even their smallest offerings are available here, and the small-midsize option -- the Lancer -- isn't even close to class competitive.
You make an excellent point. As I recall Nissan was going to build a small car for another OEM in the U.S. and their Dealer Council stood up and fought until Nissan relented.

If Marchionne has to find a car that's built by an OEM that's not currently selling a variant in the U.S. that would have to be a pretty short list.

Call me a skeptic, but I still think Marchionne is shopping FCA and looking for a buyer and scrapping the Dart/200 is just an effort to make FCA look like a more appealing acquisition. When thinking of brands in the U.S. that are "car strong" and "truck weak" Volkswagen, Honda, Hyundai/KIA, Mazda and Mitsubishi all come to mind.

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Again, in the volume that FCA will need I would guess that this would be more expensive than just keeping Belvidere or SHAP working as usual?
That may well be the case. If nothing else Marchionne has rattled the cage of the UAW and the local politicians near Belvidere and SHAP - he may be able to negotiate some concessions and still come out as a winner.
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Old 02-22-2016, 10:39 AM   #8
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Call me a skeptic, but I still think Marchionne is shopping FCA and looking for a buyer and scrapping the Dart/200 is just an effort to make FCA look like a more appealing acquisition. When thinking of brands in the U.S. that are "car strong" and "truck weak" Volkswagen, Honda, Hyundai/KIA, Mazda and Mitsubishi all come to mind.
It seems I'm not the only person who has this viewpoint - here's a link to a report from the USA Today that expands on the same thought - click here
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Old 04-07-2016, 08:07 AM   #9
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At least some parts of the business plan are starting to come to fruition. Sterling Heights Assembly Plant is losing a shift over the summer:

With the rest of the FCA lineup (ok -- pickup trucks and SUV) doing relatively well now, I don't think there will be much of a ripple throughout the supply chain. If nothing else, this will free up more 3.6L V6s for Warren Truck -- the 3.6L has been massively popular in truck the last few months, mostly because of some special leases offered right now.

source: http://www.freep.com/story/money/car...1300/82675808/
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Old 04-19-2016, 04:44 PM   #10
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At least some parts of the business plan are starting to come to fruition. Sterling Heights Assembly Plant is losing a shift over the summer:

With the rest of the FCA lineup (ok -- pickup trucks and SUV) doing relatively well now, I don't think there will be much of a ripple throughout the supply chain. If nothing else, this will free up more 3.6L V6s for Warren Truck -- the 3.6L has been massively popular in truck the last few months, mostly because of some special leases offered right now.

source: http://www.freep.com/story/money/car...1300/82675808/
Thanks for the link - that was an interesting read.

Here's one excerpt that really caught my attention:
FCA is having more success with the sales of trucks and SUVs. Sales of the Ram were up 14.4% this year, and Jeep sales were up 17.3%. The automaker's plants in Detroit, Warren and Toledo are running six days a week and about 20 hours per day amid the most robust industry sales on record.
FCA should be making money "hand over fist" if they've got plants that are cranking out vehicles six days a week for 20 hours per day.

For as well as FCA is doing it's concerning to me that Marchionne is so fixated on finding a company to merge with - it's almost like the writing is on the wall that FCA would be in serious trouble if the SAAR started to fall or their share started to decline.
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