FCA CEO Marchionne: “We ran the optimization physical exercise along with a fairly clear view of not losing one unit of sales for Ram and not losing one unit of sales for Jeep.”
Fiat Chrysler CEO Sergio Marchionne confirmed Tuesday after months of speculation that the automaker plans to relocate production of its Ram pickups to Sterling Heights from Warren and relocate production of a Jeep SUV to Toluca, Mexico, from Belvidere, Ill.
The moves are portion of a massive Strategy to shift production of smaller sized vehicles to Mexico while concentrating on the production of a lot more profitable Jeep SUVs and Ram pickups in the U.S.
Marchionne said there would certainly be no net loss of U.S. jobs despite the fact that there will certainly be some painful layoffs, a discontinuation of two passenger cars gained in the U.S. and the movement of a Jeep to Mexico.
“We have actually had obviously intense dialogue along with our counterparts at the UAW regarding the implications on head count,” Marchionne said. “I confirm now, as we have actually done along with them, that the realignment of the footprint in NAFTA is actually going to provide an enhance in manpower.”
While most of the plans confirmed by Marchionne today have actually previously been reported by the Free Press and others media organizations, they had not been verified by the company, leading to anxiety among thousands of workers at the automaker’s U.S. plants over the past eight months.
Marchionne said today that the overriding principle that guided the transformation of production was keeping the ability to make any type of Ram or Jeep auto as the business transitions to a brand-new or redesigned model.
“I will certainly provide you a perfect example. The Warren Truck Plant, which is historically one of the oldest plants we have actually in the fold of the old Chrysler and now FCA, is a plant that would certainly have actually had to go through impressive surgery in order for it to accept the brand-new Ram truck,” Marchionne said. “So the realignment of the Sterling Heights plant to accept the brand-new Ram … allowed us to effectively re-lay out the whole manufacturing footprint by not losing one unit.”
FCA shocked workers and automotive analysts in January as soon as it announced plans to eventually discontinue production of the Chrysler 200 in Sterling Heights and the Dodge Dart in Belvidere, Ill. Due to the fact that then, workers in Sterling Heights have actually spent most of the year on layoff as sales of the Chrysler 200 dropped by a lot more compared to 60%. Earlier this month, FCA said it would certainly completely eliminate a shift in July.
Charles Bell, president of UAW Local 1700, said Tuesday that thousands of workers at Sterling Heights will certainly be relieved as word gets around.
“Today’s news is indeed terrific news for the men and women of Sterling Heights Assembly Plant and those plants that support products built there,” Bell said.
He said the UAW will certainly now job closely along with its members, the state of Michigan and the company as the plant functions through the layoffs. The plant is not scheduled to start building Ram pickups until late 2017 or 2018.
Meanwhile, Marchionne said Warren Truck will certainly eventually build the Jeep Wagoneer and the Jeep Grand Wagoneer. Until today, Marchionne has actually not specifically or clearly discussed plans for two various Wagoneer large SUVs yet he has actually previously referenced “a family of Wagoneers.” The Wagoneer is expected to be a full-size SUV that could be offered in several trim levels.
Marchionne likewise said today that FCA will certainly build the substitute for the Jeep Compass and Jeep Patriot at its plant in Toluca, Mexico. Production of that Jeep SUV is to start throughout the second half of this year. Built in 1968, that plant employs regarding 2,900 workers that create the Dodge Journey, Fiat 500 and Fiat Freemont.
FCA has actually said the Patriot and Compass will certainly be replaced along with a single model yet has actually not revealed the name of the brand-new vehicle. The automaker is likewise planning to start production of the Jeep Compass/Patriot substitute at its plant in Pernambuco, Brazil, as it seeks to increase Jeep sales in South America.
Currently, the Compass and Patriot are built in Belvidere, Ill. Marchionne did not discuss the future of that plant. The Free Press has actually previously reported that the Jeep Cherokee, currently gained in Toledo, will certainly be moved to Belvidere.
That will certainly provide the automaker the ability to increase production capacity of the Jeep Wrangler and build a Jeep pickup in Toledo so it can easily fulfill need for the Wrangler in the U.S. and export a greater volume.
The brand-new production Strategy has actually roots in the company’s troublesome transition from the Jeep Liberty in 2012 to the Jeep Cherokee in 2013.
In 2012, as soon as FCA discontinued the Jeep Liberty, it lost almost a year of production volume and profits as it retooled the plant to make the brand-new Jeep Cherokee.
Marchionne vowed that FCA would certainly never ever repeat the mistake.
“The realignment of the NAFTA footprint was steered by two conditions,” Marchionne said Tuesday. “We ran the optimization physical exercise along with a fairly clear view of not losing one unit of sales for Ram and not losing one unit of sales for Jeep.”
Marchionne’s Strategy is likewise steered by the requirement for FCA to be a a lot more competitive automaker in North America. FCA’s North American profit margin’s have actually lagged far behind the lofty 10% or so that Ford and General Motors have actually cleared along with ease in recent years.
Eventually, Marchionne came to the conclusion that FCA is at a disadvantage since Ford and GM sell a greater volume of SUVs and pickups, and he set out to fix that problem. On Tuesday, Marchionne said the company’s financial outcomes prove the Strategy is already showing results.
FCA’s pre-tax profit margin for the initial quarter in North America was 7.2%, up from 3.7% for the exact same period last year.
The automaker’s total pre-tax profits topped $1.38 billion in North America, regarding double the $678 million for the exact same period a year ago.
Marchionne said the improvement is directly related to the decision to cut production of the Chrysler 200 and Dodge Dart. The competitive landscape for passenger cars has actually become far a lot more fierce over the past two or three years as consumers have actually migrated to crossovers and SUVs and automakers have actually had to resort to bigger motivations to sell cars.
“I believe the call that we gained to exit those businesses as a producer in the United States, in hindsight, was probably one of the most effective calls we’ve made,” Marchionne said. “Unfortunately, that article was not available to us spine in ’09 and ’10. Had we known this I believe we would certainly have actually refrained from the investment cycle that we went through.”
Contact Brent Snavely: 313-222-6512 or firstname.lastname@example.org. Follow your man on Twitter @BrentSnavely.
Key components of FCA’s new, multi-billion dollar production plan:
- Ram 1500 will certainly be moved from Warren Truck Assembly to Sterling Heights Assembly
- Production of Chrysler 200 at Sterling Heights Assembly ends as preparations start for Ram 1500 along with production to start in 2018.
- Warren Truck Assembly to create the Jeep Wagoneer and Grand Wagoneer full-size SUVs
- Production of Jeep Patriot and Jeep Compass in Belvidere, Illinois ends.
- Toluca Assembly Pant in Mexico begins creating substitute for Compass/Patriot later this year.
- Toledo Assembly Complex begins making next-generation Wrangler and *Jeep Wrangler pickup in 2018 and loses Jeep Cherokee
- *Belvidere Assembly Plant to build next-generation Jeep Cherokee
- Trenton Engine complex begins making brand-new four-cylinder engine in 2017.
NOTE: All the above plans have actually been confirmed by FCA CEO Sergio Marchionne or by the business except for those along with a *.
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