FCA's Mopar Madness and the Descent into Mopar Murder
FCA, an Italo-American holding company based in the Netherlands with head offices in the UK, is the company that owns the American Chrysler, Jeep, Dodge and RAM brands nowadays, along with Fiat, Alfa Romeo and Maserati. Unlike many automakers, FCA offers frequent progress reports to the press and financial markets about its plans and the state of them.
Part of this openness owes to the humbling circumstances of its birth following Chrysler’s 2009 bankruptcy and takeover by Fiat, the Italian giant with more stagger than swagger, product wise, but some fuel efficient engines and a smart and fast-talking CEO. Another part of this update mania is down to the fact that this voluble chairman, Sergio Marchionne, has revealed openly his anxiety that the companies combined to make FCA, now the world’s 7th largest carmaker, should merge (again) with a bigger, stronger outfit. Or failing that, he doesn’t say but might, at least one rich enough to keep FCA afloat when hard times return as they inevitably do in the cyclic automobile industry; one suspects a wealthy but inexperienced gamboller from China would do in a pinch. Or in a completely different vein, some old but unlikely hands from Wolfsburg, much as he hates them.
Marchionne keeps a constant congenial dialogue going with the press, hoping to remain in the news, and he usually succeeds. Recently he told a surprised world that General Motors really ought to be merging with a company just like…FCA. Gasp, the press said. GM told him to go away.
That headline grabber was weird, but everyone thought about it and Marchionne’s argument in favor of further industry consolidation, and it did externalize the company’s desire for a merger. But the other day FCA really blew the thinking automotive world’s collective mind by announcing that as part of a mid-cycle course correction it intends to stop building its Chrysler 200 and Dodge Dart sedans. The space in its factories that these models’ cancellations free up will be turned over instead to the important work of building more Jeeps and RAM trucks – crossovers, sport utilities, and pickups, vehicles thirsty, thirstier and thirstiest. No one wants to buy Darts and 200s anymore, FCA says. But there is a bottomless demand for trucks and truck-identified cars.
Ugh, how depressing. There’s no gas tax in America to speak of and there’s no denying Americans have reacted to the return of gas so cheap it’s practically free by renewing their vows of love and eternal devotion to the world of high riding sport utes, pickups and crossovers. It is hard to say which came first – more demand for these bruisers or the billions in marketing spent to create more demand.
Whatever the case, current market circumstances do nothing for the cause of reducing the nation’s carbon footprint. It’s no secret carmakers love selling SUVs and crossovers more than passenger cars because pound for pound people pay a considerable premium for the roughrider. Profitability, not utility or public policy, drive the model mix.
Shuttering key car lines, FCA may have called some sort of superficially rational audible for a company putting itself in play – better balance sheets, higher share prices, now! Except that if this is so it must also be seen as reflection on how shaky FCA’s underlying financials must really be – ideally, you shouldn’t ever have to make choices like this, where you cut off vital branches to save others. Life is about choices and if FCA sees fit to starve its American passenger car brands, well, it sure feels like FCA must be running out of money, and/or choosing to set itself up for quick sale as the Jeep and Ram only concern, FCA sans its loser brands.
Premature trapdoor exits for the Dart and 200 with no plans for replacement bode poorly for Chrysler and Dodge, which lose significant sales immediately (Dodge was already stripped of its profitable truck business, which forms the basis of the RAM brand.) What does it say about FCA’s confidence in their continued viability when it puts a bullet in the head of its non-truck product lineup? And surely it must be a grim portent too for the future of Italian passenger cars, a shrinking market which FCA completely dominates, but seem to be punting on. All its previous plans relied heavily on cost-saving synergies to be achieved with Fiat and Alfa models sharing various systems and components with those from Chrysler and Dodge products. So now what? Frankly, it looks bad all over for cars at FCA. The idea seems to be to ready a profitable truck company with significant market share for clip on addition to another large successful carmaker, less strong in trucks and SUVs. In this regard, it’s hard to argue otherwise: the Jeep name is priceless.
True, the Dart and 200 didn’t sell much, absent incentives, and even with them, they were industry also-rans, thanks, I would suggest at least in part, to limited marketing. But what these models constituted, for better or worse, was the near entirety of these companies’ passenger car lineups, the best efforts of Chrysler and Fiat engineers to make sense of the fiercely competitive arena that is the American passenger car market.
Trucks alone won’t do it. The most successful mass-market manufacturers field passenger cars that make money. And these successful passenger car lines help these carmakers achieve meaningful economies with the crossovers and SUVs in their ranges, as their platforms and component sets derive from the sedans that serve as the fundamental basis of their crossover designs. Moreover, no crossover, it’s fair to say, is better than the passenger car upon, which it is based. Up till now, entries in the more mature passenger car market have had to aim for a higher bar than the utes. Ultimately, it’s been a less discriminating field for crossovers. But that won’t always be so.
Fuel-efficient Jeeps may not predominate but they are no longer non-existent, thanks to FCA’s efforts. Still, the company will be in real trouble if gas prices go up before a merger or sale occurs. When the pendulum swings back they will be reminded they no longer have any cars to sell and couldn’t build one if they wanted to.
One needn’t look too far back in history: the fashion can change very quickly. Chrysler got caught out with the wrong model mix back in 2008, before Fiat came in. Yet, ironically, if anything FCA is on a course to be even more truck and SUV dependent than its impoverished predecessor corporation.
FCA’s work of the moment then is making sure its balance sheets reflect as many sales of trucks and Jeeps as the good lord is willing to let them ring up, caring not a whit what willy-nilly expansion will do to these brands and their credibility. Meanwhile contraction at its other brands can only spell one thing.
FCA has lost. Its best efforts, however spirited and well intentioned, were hurried, and underfunded. The FCA team had their moments but they weren’t good enough. Though profits returned with sales up and health care and legacy obligations shed in bankruptcy, they were never strong enough for FCA to even come close to mopping the floor much less to competing with mainstream passenger car favorites like Toyota, Honda, Nissan and Hyundai.
Though squarely in the “not bad” category, the 200 and Dart not only didn’t mop the floor, sales wise, they weren’t even tough enough to feather dust the sconces. Meanwhile, a surprisingly limited range of Fiat cars haven’t been able to take on the Japanese and the Koreans here in America and Alfa Romeo’s triumphal return has been repeatedly delayed and downgraded.
Everywhere you see FCA’s woes, there is nearby the same paucity of funds to do the right thing. Pretty soon, one fears, the company’s going to be out of the passenger car business altogether – by that I mean the business of making regular cars, not just glorified minivans and jumped up pretend safari-mobiles – and when that day comes, it’ll be a sad one. Even worse than when they killed Plymouth.