Chinese Jeeps and Faster Dodges: Fiat S.p.A. Reveals Its Plan for Chrysler
Well, now we know what newly merged Fiat Chrysler Automobiles wants to do.
The question is, will the Italian-American automaker be able to pull it off?
FCA's executive team, including CEO Sergio Marchionne, spent this past Tuesday giving a full-day briefing on the company's plan for the next five years.
So what's in it? A whole lot of things that FCA hopes will add up to 7 million or so sales a year by 2018.
In a sense, it's a lot like the company's last five-year plan, announced in 2009: It's complicated, with a lot of moving parts; it's audacious, with some goals and assumptions that seem unrealistic; and details of how it'll be financed are fuzzy.
In a nutshell, Marchionne and his deputies plan to turn FCA's somewhat motley collection of brands and products into a cohesive, profitable, thriving global automaker. It's a complicated plan, and we'll be diving into it in more detail in the coming days and weeks. But for now, here's a brief look at what FCA has in mind for each of its brands.
Here's the biggest news: Jeep will become FCA's leading global brand. New assembly lines in Italy, Brazil, India, and China will begin making Jeeps for overseas markets; FCA expects to build 1.9 million Jeeps in 2018, up from about 800,000 last year.
Most of those added sales will come from overseas: FCA is betting that Jeep can make big inroads in Latin America and Asia. But new models are coming, to add to the small Renegade that was launched earlier this year. The Patriot and Compass will be replaced by a single model in a couple of years, and the long-rumored three-row Grand Wagoneer will in fact return -- but not until 2018.
Chrysler was once a luxury brand, but now it's set to become FCA's mainstream U.S. brand. It'll go head to head with the likes of Ford and Toyota with sedans, crossovers, and the Town & Country minivan -- starting with the just-released 2015 Chrysler 200.
A smaller 100 sedan, a couple of new crossovers, and an all-new Town & Country will join the 200 and the just-refreshed 300 in Chrysler's lineup over the next couple of years. FCA hopes that the new models (and the elimination of competing Dodge-brand vehicles, see below) will boost Chrysler's sales to 800,000 a year by 2018, from about 350,000 last year.
Chrysler's former mainstream brand is shifting gears and becoming a performance-minded brand, as FCA aims to attract more youthful buyers in the U.S. The Grand Caravan will be phased out, and the recently discontinued midsize Avenger sedan won't get a replacement.
What do we get instead? Muscle cars ... and crossovers and SUVs inspired by muscle cars.
Dodge is building on what it thinks it does best nowadays, and that's its brawny muscle cars, the Charger and Challenger. The compact Dart will stick around, but it'll be turned into more of a performer with a couple of turbocharged engine options arriving late in 2016 -- as will the upcoming replacement for the Journey crossover, which is expected to be based on the Dart's platform. (Yes, there will be an SRT version of the next-generation Journey.) A new smaller car will be added in 2018.
The handsome Durango SUV carries on, and the hot Viper sports car, briefly rebranded as "SRT Viper," is once again a Dodge. (The separate SRT brand is gone.) Meanwhile, the minivans and bland but capable family cars that used to be Dodge's bread-and-butter are gone, or will be soon.
It's a big change that is driven by demographics: FCA thinks this is a formula for attracting younger buyers. But FCA does expect Dodge's sales to dip before trending back upward. The plan calls for Dodge's 2018 sales to be close to last year's, around 600,000 vehicles, as new products gradually make up for the loss of the Avenger and the minivan.
Ram and Fiat Professional
Organizationally, the Ram pickup brand is being combined with Fiat Professional, Fiat's line of commercial vehicles that is sold mostly in Europe and Latin America. Some of Fiat's commercial vans will come to the U.S. market under the Ram brand, but for the most part, FCA isn't messing with Ram.
Ram's pickups have been gaining market share, and FCA wants that to continue. The Ram 1500 will be refreshed next year and will receive a major update for the 2017 model year; new heavy-duty versions will follow a year later. FCA hopes that Ram will generate around 620,000 sales in 2018, up from 463,000 last year.
The Fiat brand
Fiat covers two different bases, depending on where it's sold. In the U.S., for instance, the Fiat 500 is a somewhat premium offering, a small car with character and some deluxe features. But in other parts of the world, Fiat is a provider of affordable basic transportation.
Executives on Tuesday talked about a "zipper" that linked the "rational, functional" basic-transportation Fiat with the "emotional, aspirational" 500 and related products. FCA's plan is to build on both sides of Fiat, but with a simplified lineup.
Fiat's global product line will be streamlined and focused around the small cars it does best; incremental expansion around the world will bring sales to about 1.9 million in 2018 from 1.5 million last year, FCA hopes.
Once among the greatest of car brands, Alfa Romeo has been sadly neglected for years. But FCA is betting heavily that the Alfa brand still has enough "pull" to be worth an investment.
FCA has set up a "skunkworks" (that's their word for it), a separate location -- outside of FCA's mainstream management structure -- where teams of engineers and designers are working on an all-new line of Alfa Romeos. The goal: Vehicles that can take on BMW and the other German luxury brands all over the world.
It's an ambitious, expensive, high-risk project. Why bother? Simple: Well-run luxury-vehicle brands can be immensely profitable, and luxury is a fast-growing category globally, thanks to rising wealth in Asia and elsewhere. Simply put, FCA needs to be a mass-market luxury player, and the Alfa brand is its best option.
FCA says it will launch eight new Alfa Romeos by 2018 -- five sedans, two crossovers, and a "specialty" product that may be a sports car set to slot in above the 4C. Alfa sold just 74,000 vehicles last year, mostly small cars in Europe; FCA wants to sell 400,000 Alfas in 2018.
We've known for a while what FCA has in mind for Maserati: A line of luxury vehicles that can steal sales from BMW and Mercedes-Benz (and maybe a few from Porsche) at the higher end of the market.
The Quattroporte and new Ghibli sedans are part of that; they'll be followed by the Levante, a luxury SUV; coupe and convertible versions of the Alfieri sports car, and a new version of the high-end GranTurismo sports coupe. The sedans and the Levante will eventually have a new 560-plus horsepower V8 available, as well as an expanded range of diesel options.
Maserati sold a bit over 15,000 vehicles in 2013; FCA hopes to sell 75,000 in 2018.
The crown jewel of Italian automaking, Ferrari is the stuff of legends -- and one of the world's most valuable brands of any kind. FCA isn't going to mess with success: Ferrari will continue to be Ferrari, offering a genuinely exclusive line of extreme sports cars while continuing to race at the highest levels.
Ferrari's production has been capped at 7,000 vehicles a year to preserve exclusivity. CEO Sergio Marchionne hinted that it could rise to 10,000 a year in time as the world's high-net-worth population continues to expand, but it's not expected to happen in the next five years.
Ferrari's profit margins will be expanded with exclusive editions and more extensive customization options -- nearly anything on a Ferrari can be customized, for a (staggering) price. As mentioned, Ferrari's sales volumes are expected to remain steady at about 7,000 a year for the duration of the plan.
So is this plan going to work?
Marchionne's last five-year plan worked out pretty well, which means it's worth taking this one seriously. But this new plan is expensive: All together, the price tag is about 55 billion euros, or $77 billion.
To get started on funding that, FCA has about 20.8 billion euros ($28.8 billion) of "total liquidity" (cash plus credit lines), it said on Tuesday -- along with about 10 billion euros ($13.9 billion) of debt.
That's not a lot. It didn't help that the company posted a first-quarter loss of 319 million euros ($442 million) after absorbing a series of costs related to the merger.
The plan's big price tag, together with that first-quarter loss, made a lot of analysts skeptical. FCA's stock -- which has been up sharply this year, thanks to optimism as the Fiat-Chrysler merger was completed -- fell more than 11% in Milan on Wednesday, as investors digested the costs of the plan.
(FCA still trades as "Fiat S.p.A." on the Milan exchange; the company is expected to move the listing to the New York Stock Exchange, and update the name, later this year. Meanwhile, U.S. investors can buy shares using the ticker FIATY.)
Can FCA somehow generate the capital needed to fund all of these brand transformations, all of these new models? Stranger things have happened, but it seems like a long shot.
I won't be surprised if some of these programs get delayed, or cut back. For instance: The Alfa Romeo plan is expected to cost $7 billion. That's a lot of money to get to 400,000 sales a year. And it's a high-risk effort: The most important of the new Alfas will be competing in what is arguably the toughest model segment in the business. If the quality isn't there, the sales won't be there, either.
Other huge questions remain: Can FCA deliver Alfas (or Maseratis) that meet BMW-buyers' expectations of quality and reliability? Will the Ram -- a critical source of profits for FCA -- continue to gain ground after the all-new Ford F-150 arrives? Will Americans take Chrysler seriously as a mainstream brand? Is building a brand around Hemi Chargers really a good long-term plan as gas prices rise? Will Chinese buyers really want that many Jeeps?
What do you think? Now that we've seen the plan, does this mashup have a chance? Scroll down to leave a comment with your thoughts.
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The article Chinese Jeeps and Faster Dodges: Fiat S.p.A. Reveals Its Plan for Chrysler originally appeared on Fool.com.John Rosevear owns shares of Ford. The Motley Fool recommends BMW and Ford and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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