Thursday, May 25, 2017

FCA's 2016-2017 Blunders




Alexander Carabitses

Reporting on FCA's stupid business moves has unfortunately become a traditional keepsake for this blog.  Why?  Well, to put it simply, they never seem to stop.  I'd equate them to a California forest fire in the middle of the summer.  It doesn't matter how much fire retardant, foam, and water is dropped on it, it just keeps spreading and spreading until it's wiped out everything in its path.  The more I report on their struggles, the more I feel like a news anchor or reporter  who informing the public of a natural disaster as it unfolds right in front of me.  Yes, it is tragic, but I have to keep a straight face and report on the facts.  So without further ado, here we go again.

I first want to begin by saying that I am honestly counting down the days until FCA's CEO, Sergio Marchionne, retires in about a year and a half.  It should be pretty clear to the media at this point that he should never be taken seriously, as he does nothing more than run his mouth about future product and business decisions that never happen.  Following a year-long quest to find a merger partner, Sergio has emerged unsuccessful.  The greatest hilarity was the back and forth between the Volkswagen Group and FCA, which saw Sergio express interest in merging with VW.  VW said no, but then changed its mind a week later, and then Sergio said no.  After this failure, Sergio said the dumbest thing ever: that he'd consider spinning off Ram and Jeep in the same way that he spun off Ferrari, a move that would provide short term gain and long term loss, as those are FCA's biggest assets.  If Sergio were to do this, I'd be willing to bet that we could kiss the entire company goodbye.  Remember the industry rule: large SUVs and pickup trucks bring in bigger profits than smaller passenger cars.  With that in mind, I sincerely hope that Sergio was kidding when he mentioned this as a consideration.


I should also quickly note that Jeeps aren't selling as well this year, but Jeep brand chief, Mike Manley, says that this was expected and that it can be blamed on a drop in fleet sales (which is a good thing), as well as the launch of the all-new Compass, which required some tooling change.

Now things are getting even worse from a financial standpoint, the US Justice Department has just sued  FCA for cheating on diesel engine emissions tests in the US.  Now the company already has a software fix in place (the company used a similar cheating methodology to VW), but the Justice Department still wants FCA to pay for its wrongdoing, even though FCA has been negotiating with regulators for months now and also denies that it deliberately did anything wrong.  This is of course the early stage of development for this case, but we will certainly have to follow it closely to see if this cash poor company will be able to pay fines for its wrongdoing. Also remember that FCA is in hot water over in Europe for cheating on diesel emissions tests as well.
(Images credited to Autoguide.com)

And we now come to the most important aspect of the business: products.  FCA's product portfolio is an unmitigated disaster at this point.  A new Dodge Charger and Challenger have been delayed until the start of the next decade, while another refresh of these models will show up next year (including wide body versions of the Hellcat models for no reason at all).  Speaking of which, in February of 2018, the Challenger will be a decade old, so bear that in mind when the brand touts the Demon or any other bizarre creation that they come up with in the next few years.  One would think that since the new generation of Dodge vehicles will be based on the Alfa Romeo Giorgio platform and that since this platform is already in use, these Dodge models would be coming sooner.  Unfortunately, this is not the case. I should also mention that the delayed Chrysler Pacifica Hybrid just went on sale in the spring when it was supposed to go on sale in the fall, because FCA is extremely behind with electric car technology and acts like it has no clue what it's doing.  Finally, I should remind all of you that crucial new models, including profitable Chrysler crossovers are still being delayed because the company is too cash poor to put them through development.  Did I mention that it took nearly a decade for FCA to realize that the architecture it wanted to use for the Grand Wagoneer wouldn't work, so they had to start from scratch?  Here's the point, if FCA can't churn out profitable models, it will never be able to attract investors or a merger partner because of all of the money they'll have to throw into this car firm.


So in a sea of endless negativity, are there any positives?  Well, yes actually.  Both an all-new Jeep Wrangler and a heavily revised Ram 1500 will be launched next year, along with the refreshed Dodge models.  Also, both an all-new Dodge Journey and a Wrangler-based pickup truck (the latter has been spotted testing) will also launch late next year.  Lastly, Alfa Romeo is expected to turn a profit of some size by the end of this year.  As you can see, FCA has a few thing going right, but unfortunately, they cannot cover up the massive issues that continue to plague the company.

That's all I have to say for now.  Thank you for reading and have a good week.

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