By Christopher A. Sawyer
The Virtual Driver

(February 1, 2016) Last week, Fiat Chrysler Automobiles (FCA) announced some major changes to its business plan. What sparked the most interest was the delay in launching Alfa’s new lineup, and Sergio Marchionne’s statement that Chrysler would be dropping the Chrysler 200 and Dodge Dart, replacing them with crossovers as these cars came to the endow their product cycle.

Lost in all of this is the fact that this is the 107th (only a slight exaggeration) change to the company’s business plan since Fiat scooped up Chrysler in the riptide of the global economic downturn.

Perhaps prophetically, the presentation begins with a picture of Mark Twain and, perhaps, his most famous quote: “The reports of my death have been greatly exaggerated.” Though I am certain Marchionne and his team thought this funny, it arrives after news stories chronicling FCA’s reliance on purchasing credits from other automakers in order to meet its U.S. Greenhouse Gas Compliance (a.k.a. fuel economy) targets, a softening of the global market (especially China), slowing U.S. sales on the horizon, FCA’s hounding of GM as a merger partner, and more. The company may not be dead, but it looks desperate.

2016 Chrysler 200

FCA’s shift to trucks and SUVs, and away from midsize and smaller cars appears radical. Both the Chrysler 200 and Dodge Dart are built on the competent and flexible Compact Wide US (CWUS) platform that also underpins the Jeep Cherokee. Neither car had a smooth launch, and FCA made some big blunders during their development and launch. The Dart is subtly handsome and a nice drive, but it doesn’t stand out in an increasingly extroverted segment, and launched with a bewildering array of options and powertrains.

The Chrysler 200 is sleek, but its fast roofline makes entry into the rear seats awkward, and its styling makes it look smaller than the competition. And neither has been supported with a credible advertising, sales or marketing plan. It almost appears as though FCA gets an idea, creates a marketing or advertising program that supports it, pushes it out to the marketplace, and then leaves it to die. It may be that there isn’t enough money to pound the message home, but it’s just as likely that the Europeans don’t understand the depth and breadth of this nation, or the dizzying number of platforms available to communicate with the customer.

A case in point is the “Imported From Detroit” ad campaign that made everybody sit up and take notice. It was dark, brooding and made an impact, but the company watered it down with each passing quarter to the point that it disappeared altogether. In its place it substituted the “America’s Import” ad campaign that underserved the Chrysler 200. Yet it did nothing to placate those Americans who still have a sour taste over past Chrysler and Dodge designs that were not built to the highest standard.

Hyundai suffered the same problem in this market, arriving with the lowest-priced car you could buy, wrapping it in ItalDesign clothing, and reaping the whirlwind as they disintegrated  in use. With hard work, determination, and a 10 year/100,000 mile warranty, Hyundai earned back the consumer’s trust, and wowed them with stylish cars with competitive quality and equipment levels. But FCA seems to be in too much of a hurry to even consider this approach.

Shifting to the hot truck/SUV market should protect FCA’s per vehicle margins as the car market is shrinking while more competitors enter. However, they’re also building trucks and SUVs of the type FCA covets, and will increase competition in the market. This suggests that the company’s plant to enhance its vehicles’ technology and recover its costs through pricing is, at best, fanciful. Especially if, as analysts predict, the new car market in the U.S. begins to constrict after a record year in 2015.

As part of its production restructuring, FCA has increased its sales targets for Jeep, driven by the introduction of a pickup, large three-row SUV, and a new, aluminum-bodied Wrangler family. This should be enough to keep the 4x4 brand simmering along, though it will be interesting to see how the market reacts to a Wrangler hybrid.

On the plus side, FCA seems to have settled on a 48-volt modular mild hybrid architecture that can be used across car lines and brands to meet fuel economy regulations. Plus, it is adding diesel power to the Wrangler. But can it sell these technologies to the public when gas prices are low and VW’s diesel problems remain in the news? And will the real world fuel economy of these vehicles be high enough to support strong sales should oil prices rise?

Further, if Jeep is to live up to its promise as an upscale contender, will FCA be able to develop a battery electric version for Europe to go up against Land Rover, etc.?

Chrysler and Dodge will continue to sell larger rear-drive cars like the 300 and Charger, but the rest of its car lineup will have to be sourced from other automakers. The most likely suspect is Mazda, who has not been able to build sales that will support its R&D investment. Building Chryslers and Dodges (and Fiats) on Mazda architectures will allow it to spread its costs over a greater number of vehicles, driving the cost of production and components down.

Assembling these cars in Mexico makes the most sense, as it allows both FCA and Mazda to build close to their North American customer bases, and under the NAFTA umbrella. Unlike cars built in America, those sourced from Mexico can be sold in Europe without onerous taxes or tariffs.

Should Mazda not want to play, FCA has few alternatives. GM and Ford won’t waste any effort supporting FCA, and the Asian automakers (other than Mazda) are too busy meeting their own needs. VW, drowning in its own ham-handed handling of its diesel woes, doesn’t have the energy or money to take on this task.

Then there’s Alfa and Maserati. The plans for Alfa have changed more times than a supermodel at a fashion show, with the last iteration taking the brand upmarket into the luxury/performance realm where it would leave all but a couple of its front-drive cars behind. Now, in the latest case of over promising and under delivering, Marchionne and his team have slowed the launch cadence for new Alfas, and extended the timeline for completion to mid-2020. On the plans are a mid-size sports utility, a new full-size sedan, a small and a large sports utility, two specialty models, and hatchback to replace the Giulietta.

It’s an ambitious program, and one that would have been almost impossible to pull off by the end of 2018 as originally planned. The respite, says the revised FCA plan, relieves some of the pressure arising from uncertainties in China, and gives time to develop a proper global distribution network. It also gives it an excuse to drop a self-imposed deadline that was overly ambitious.

Tying Alfa up with Maserati’s dealer network is a quick solution, but places two similar brands under one roof. Requesting separate sales space for Alfa would help, but not many U.S. dealers will be happy with this given what happened to those who built a standalone Fiat dealership earlier this decade. They never got the promised product. And, if FCA is to get the biggest return on its investment, Maserati, Alfa and even Chrysler and Dodge will have to share components and systems in order to drive down costs and risk through higher production volumes.

Yet lurking around the corner is the worry that this will turn out to be yet another interim plan that will be modified or scrapped as things change. It takes a minimum of 36 months to develop a new vehicle from a clean sheet, and FCA is already at a point where its 2019 vehicle programs must be started. Further delays or changes will adversely affect cost, quality, potential sales volumes, and timing.

It looks like Mark Twain may yet have a few chapters to write on this saga.

The Virtual Driver