FCA’s sweater-in-chief Sergio Marchionne has a plan to turn around the debt-laden and ailing automaker: stop building cars that lose money. That sounds like common sense, so long as oil prices stay low and the demand for trucks, SUVs and crossovers remains high.
But that plan introduces a new set of problems, chief among them the fact that ditching the car market leaves FCA exceptionally exposed to future volatility in oil prices. Crude prices affect prices at the pump, which affects the demand for certain types of vehicles. Sergio is betting oil prices will stay low by focusing on vehicles with ever-increasing price tags and ever-growing gas tanks.
Still, there will always be some demand for small cars. It was true in 1950 and it is true today. So what will Mr. Sweater do to meet that demand? Simple: he’ll buy those vehicles from another automaker and badge engineer them the old-fashioned way.
Sergio’s plan comes with considerable risk, but the rewards are just as substantial. That doesn’t mean he won’t find a way to hedge his bet somehow. After all, the Italian-American automaker is the least likely of all to be able to weather a mild recession, next to Tesla, and its reliance on Canada — FCA was the top automaker in Canada in 2015 — could backfire thanks to that country’s mild recession.
So, who will build those insurance-policy cars for FCA? And where? Here are the contenders.
The “little automaker that could” is chugging independently along post-Detroit ownership, and it’s not afraid to work with others even if that means ceding segments to some of its competitors. Case in point: the Mazda2 — or the Scion iA, or Toyota Yaris Sedan, depending on whether you live in Mexico, the United States or Canada. All three cars are built at Mazda’s brand new Mazda de Mexico Vehicle Operation in Salamanca, Mexico, along with the Mazda3 (the Mazda2-based CX-3 is manufactured in Japan).
It’s no secret that small and midsize car volume isn’t growing as quickly as that of crossovers and SUVs. The Mazda3 has also been thought of as more performance oriented than the Dodge Dart. And the Mazda6 isn’t half bad either. Could that make Mazda a legitimate contender for Sergio’s dollars?
Renault-Nissan and Daimler
Are Sergio’s chances with Renault-Nissan still Ghosn on? Or are they Ghosn like German management escaping an Auburn Hills C-suite?
The FCA of today is far from resembling the Chrysler of many yesterdays past. The management in Auburn Hills is different and could provide the basis for some interesting dialog between Dieter Zetsche and Sergio Marchionne. However, Mercedes-Benz’s small and midsize products are geared more toward premium products — a description not uttered in Dodge-Chrysler-Jeep-Ram showrooms much over the last decade.
There is, however, some real opportunity with Renault-Nissan. Ghosn is no stranger to making projects work with other automakers, nor is he a stranger to smashing together two wholly different companies and making them kiss like a Mike Tyson meme. Renault Samsung Motors, an 80.1-percent owned subsidiary of Renault, even has a new position recently vacated by Mitsubishi. The ailing Japanese automaker had planned to source sedans from Renault Samsung, but those plans are kaput.
It may be relevant that Chrysler and Nissan have dated before — even recently. Nissan had planned to source trucks from Chrysler’s Ram brand before simply poaching Ram’s main man.
With the upcoming Buick Envision and the already-here Volvo S60L, the cherry has been popped on Chinese automotive imports. And it isn’t like Chrysler hasn’t flirted with the idea of building a small car with a Chinese automaker in the past.
Chery and Chrysler ended their joint project to build small cars for U.S. consumption in 2008, prior to Fiat’s takeover of Chrysler. Could they come back to the table again and bring Chinese cars to FCA dealer lots?
There are other automakers out there that would love to take Sergio’s money, no doubt, but the above options seem most likely.
What do you think? Who else would be willing to prostitute its own vehicles for American customers?