Fiat Chrysler's Production Capacity Boosted
Fiat Chrysler's Jeep, Ram Pickup Production Capacity Boosted By Half A Million Units Going Into 2018
FCA shut down production of loss-making Dodge Dart and Chrysler 200 in late 2016. On a net basis, two FCA factories will be idle for calendar year 2017.
However, by 2018 FCA may be producing as many as 400,000 to 500,000 net incremental units from newly retooled factories in Michigan, Illinois and Ohio.
These new products will be a new RAM pickup truck and Jeep Wrangler pickup truck, plus eventually Jeep Wagoneer and Grand Wagoneer large luxury SUVs.
This is a massive shift from dwindling and loss-making uncompetitive cars to the most profitable Jeeps and pickup trucks imaginable.
Tesla (TSLA) tends to get almost all the attention when it comes to speculation about increasing U.S. automotive factory capacity these days. Not that there aren’t other automakers who aren’t also expanding in the U.S. by building out other automobile factories, as Subaru (OTCPK:FUJHY), BMW (OTCPK:BMWYY), Volvo (OTCPK:VOLVY) and others have been working on the last year or two.
However, there is yet another kind of production expansion that doesn’t involve building a new factory or even meaningfully expanding the size of an existing automotive assembly plant: The return to new production from having reorganized existing production.
Say what? What does that mean?
Let me explain.
Fiat Chrysler [FCA] (FCAU) is one of the world’s largest automakers, as it produces and sells approximately five million vehicles per year world-wide. For example, in 2016 FCA sold 2.24 million vehicles in the U.S., flat over 2015: and 279,000 in Canada.
FCA owns brands such as Jeep, Dodge, Fiat, Chrysler, RAM, Alfa Romeo and Maserati. One of the major strategic initiatives FCA took 1-2 years ago was to decide to discontinue the manufacturing of its two smallest cars in the U.S.: Dodge Dart and Chrysler 200. The reason for this was to be able to manufacture more future versions of Jeeps, pickup trucks and other SUVs without having to build more factories or materially expand the existing ones.
In the years leading up to the second half of 2016, Dodge Dart and Chrysler 200 had been miserable failures with disappointing sales and attendant heavy discounting that wiped out any net profits for those two products. Meanwhile, FCA’s profitability, especially for the Jeep and RAM pickup truck product lines, was very healthy.
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