The Untapped Potential of Wrangler
Jeep is a pillar of financial strength for FCA. The brand is poised to deliver its sixth consecutive year of growth. Even if you despise the Compass and Patriot, it would be difficult to argue that Jeep CEO Mike Manley has been anything but a good steward of the brand.
But how is Jeep going to keep its 6,500 UAW members in Toledo working after 2017 when the Cherokee departs and there’s a gaping 240,000 unit hole to fill? Uncertainty over how this gap will be filled, in conjunction with the failure of union negotiators to eliminate the two-tier wage system, were the primary factors in a strong no vote from UAW members in Toledo last week. Nonetheless, FCA has a unique opportunity to address their workforces’ legitimate concern over job security, give consumers what they want, and find new homes for Jeep products across the globe.
The Wrangler has long been Jeep’s cornerstone, an iconic yet niche product. As recently as 2005, only 87,000 Wranglers were produced. Given the historically narrow appeal of the Wrangler and Jeep’s drive for expansion, the brand has acted responsibly by developing new nameplates. In 2006, Commander was added, joined by Compass and Patriot in 2007, and this year saw the launch of the reborn Renegade as a standalone model. Today’s Jeep dealer offers no fewer than six different nameplates, double what was available in 2005. This growth strategy was well timed for today’s SUV/CUV crazed market. However, the market continues to move and the Wrangler is hot. Domestic Wrangler sales alone will top 230,000 units this year.
It is time to go big. No, I am not suggesting Jeep produce Hellcat Wranglers or launch a Hummer H1-style Super Wrangler. Instead, I am calling for FCA to wrap itself in a halo of eight different Wranglers across two wheelbases. These would include the traditional two-and four-door Wranglers we know, the all-but-certain single and double cab pickups, and a long wheelbase, hard-top wagon. That’s makes five. To get to eight, Jeep should go further and offer both pickups and the long-wheelbase wagon in heavy-duty form.
FCA needs to participate in the rebounding small/mid-size pickup segment, and we already know the Wrangler has been selected for the task. Jeep has been running flat-out for several years trying to meet rising Wrangler demand. The accepted wisdom, as demonstrated by the recent UAW contract vote, is that Wrangler pickups alone cannot make up for the production shortfall in a post-Cherokee Toledo. But there is good news. When FCA committed to converting Toledo North to body-on-frame production, it gave Jeep an opportunity to go beyond a simple capacity increase by specifying larger production line carriers capable of handling units longer than the current 116-inch wheelbase Wrangler Unlimited. This is pivotal because larger carriers are prerequisite unless you want a double-cab Wrangler pickup with a nearly useless Ford Explorer Sport Trac-style short bed.
How many Wranglers can Jeep sell? Jeep will strain to produce 230,000 this year for domestic consumption, plus another 30,000 for international markets. Nobody knows how much more demand there is, but removing the capacity constraint will help. A 15-percent increase would be reasonable and suggests demand for about 300,000 traditional two-and four-door Wranglers.
What does demand look like for Wrangler pickups? Last year, Bob Sheaves, former Senior Design Engineer at DaimlerChrysler, wrote about an estimated demand for 40,000 single-cab Wrangler pickups. That seems optimistic given that GM and Toyota have elected not to offer single cab versions of their midsize trucks in North America. But for the sake of argument, let’s assume Mr. Sheaves knows something we do not. Nonetheless, perhaps half of those 40,000 single cabs will come at the expense of other Wranglers. Demand for double cabs with five-foot beds will undoubtedly be higher and could exceed 60,000 units in North America, slightly less than the North American total for the third-place Nissan Frontier. About twenty-percent of Wrangler double-cabs will likely come at the loss of Wrangler Unlimiteds. These estimates result in 100,000 pickup sales, with a net increase of 65,000 new sales across the Wrangler family. Add these to the 300,000 two-and four-door traditional Wranglers and Jeep would have a total of 365,000 units, still about 25-percent short of FCA’s stated target of producing half a million Jeeps a year in Toledo — a significant factor in workers’ emphatic down vote on their new contract.
Why not offer heavy-duty versions of both pickups and the long-wheelbase wagon? Answer: Panic over Ram 1500 cannibalization, a fear that needs to be debunked. Manufacturers overlap their B, C, and D segment cars — why not trucks? GM did the analysis, took the risk, and demonstrated that product overlap across their truck lines do not inevitably lead to one model consuming the other. GM is on pace to deliver ten-percent growth in Silverado this year, plus 124,000 of its Colorado/Canyon twins.
Don’t fear the cannibal, FCA. You have a unique opportunity to find new customers without consuming yourself.
Additional objections to HD Wranglers may include excessive development cost, over-stretched engineering resources, and additional production complexity.
FCA will continue offering the J8 alongside the next generation Wrangler, and there will be demand from J8’s small customer base for long-wheelbase versions. Thus, aside from the regulatory hoops these HD units would need to pass through, a material portion of the development cost has already been committed, thus decreasing the additional expense required for development.
Just as preexisting J8 work mitigates some development cost, it also provides leverage for the engineering effort of a heavy-duty Wrangler. The differences in standard and HD Wranglers would not be tremendous because HD models would not need to achieve J8’s 2,600 pound payload capacity, extreme air filtration, or helo-lift requirement. Wrangler HDs would be a J8 “light”. They could be equipped similarly to J8 with full-floating front hubs, while standard units retain their semi-floating setup. Out back, HDs can either be leaf sprung, like J8, or adopt a Ram-like coil arrangement. And the structural enhancements associated with the J8 can also be selectively adopted to deliver a highly capable, well-differentiated HD Wrangler.
The J8 is a well-engineered enhancement of the Wrangler, designed specifically for an intense duty cycle in sub-Saharan conditions. But for those thinking J8 is a full tactical, military-grade product, I can attest having driven and inspected them, they are not. Jeep dug into the FCA parts bin whenever possible, and made J8 simple enough for assembly from CKD (Knock-Down Kit) in Egypt.
For example, J8 borrows the NV241 transfer case with a 4.10:1 final drive ratio from the Wrangler Rubicon and the rear brakes are sourced from Ram. The unique air filtration is an aftermarket bolt-on, and the afterthought second battery is located in the rear cargo area. Make no mistake, the J8 tackles obstacles like a mountain goat — my effort to get one stuck on the worst FCA’s Chelsea Proving Grounds could offer was my absolute failure and the J8’s success.
Capabilities aside, manufacturing eight different Wranglers, three to J8 “light” spec, in a serialized production environment would not require significant effort — particularly if standard and HD Wranglers are developed in parallel. The differences would be bolt-on and component replacement, not structural. In fact, the delta between standard and HD Wranglers would be less pronounced than those between Ram 1500 and 2500, which are produced at the same plant in Saltillo, Mexico.
The benefits of including heavy-duty Wranglers in the product mix are manifold. These HD models would address FCA’s Toledo production gap and kill two valuable birds with a single platform: step-up consumers and international markets.
Step-up buyers are the consumers Ford, GM and FCA already know well. These are the guys who believe more is always better and buy three-quarter and one-ton trucks to accomplish what today’s half-ton truck is easily capable. In order to appeal to these customers, Jeep needs to increase Wrangler’s powertrain selection from one to three. The next generation Pentastar 3.6-liter V-6 can continue to provide motivation, as well as one additional gas and one diesel option. There have been rumors of everything from a supercharged 3.2-liter V-6 to a Pentastar derived 4.8-liter V-8 — either would work. But given Ford’s success with its 3.5-liter twin-turbo Ecoboost in the F-150 and Expedition, Jeep should consider a similar approach. Jeep’s likely choice for a diesel would be the next-generation 3.0-liter VM Motori mill that is offered in today’s Ram 1500 and Grand Cherokee where is delivers 420 lb-ft of torque and class leading fuel economy. Assuming the availability of power plants like these, the value of an HD badge among domestic customers should not be underestimated and would provide Jeep with a product capable of conquest sales across a wide spectrum of full-size truck buyers. Could Jeep convince three-percent of full-size truck shoppers to switch to Wrangler? How about two-percent? Let’s assume Jeep converted just 1.5-percent of North American full size truck buyers to Wrangler. That would equate to 37,000 new customers, driving up average transaction prices along the way.
A set of three HD Wranglers would not only bring the latest advances in safety and emissions technology to the Jeep product range, but new capabilities as well, enabling the brand to transition from a consumer-oriented SUV and CUV specialist into a broader manufacturer addressing retail as well as commercial markets. Land Rover is on the cusp of building its last real Defender in January, leaving the 30-year-old Toyota Land Cruiser 70-Series alone in an international space — a space in which the Wrangler is primed to thrive. Land Rover will sell 23,000 Defenders this year and Toyota sells about 80,000 70-Series Land Cruisers annually, but both the Toyota and the Land Rover are inefficient, unsafe, antiquated designs.
The longevity of the 70-Series has been uncertain for years, but not for lack of demand. The problem is safety and the difficulty of bringing the 70-Series up-to-date would be akin to Apple offering iOS 9 updates for the original Mac. Specifically, Toyota is encountering safety related obstacles in attempting to satisfy its large fleet operators.
For example, mining giant BHP Billiton is now requiring their global fleets to conform to safety requirements the 70-Series is challenged to meet. And the drive for safer more efficient utility vehicles is not limited to mine operators. The UN, a bellwether in procurement policy for humanitarian, commercial, and government fleet operators worldwide, recently promulgated new Sustainably Procurement Guidelines. These vehicle procurement guidelines favor fuel economy and emissions over vehicle price. Pedestrian safety, a weakness for the 70-Series, is also encompassed in the guidelines. Australia’s version of the NHTSA, the ANCAP, gives the current 70-Series a 3.8 out of 36 possible points for pedestrian safety. The current Wrangler is no pedestrian safety overachiever, but its score is 37-percent higher than the 70-Series at 5.2. However, the Toyota will retain the update-resistant 70-Series platform, while the all new Wrangler will benefit from advances made since the Mac was available with 128k of RAM.
A new Wrangler lineup would also outflank the Toyota in terms of performance, operating cost and emissions. A Land Cruiser double cab pickup equipped with its most powerful engine, the 4.5-liter turbo diesel produces 317 ft-lb of torque, delivers 20 mpg combined, and generates 306 (g/km) in CO2 emissions. A Wrangler HD double cab, when equipped with the current VM Motori 3.0-liter turbo diesel, would produce about 420 ft-lb of torque. Assuming Wrangler comes in at a weight similar to the 5,200 to 5,600lb Ram 1500, the HD Wrangler would deliver about 24 mpg city, and generate 198 (g/km) in CO2 emissions. In short, an HD Wrangler would yield few measurable advantages to the Land Cruiser.
Additionally, Jeep can step into the international light-utility market as no other company can. The company not only has access to FCA’s international footprint, but it enjoys global brand recognition unprecedented for a company that has not meaningfully participated in global markets for decades (with the exception of selling t-shirts and key chains). However, the 70-Series is a sound product sold by an international heavyweight with a 30 year head start and success is not determined based on quantifiable advantages alone. The Wrangler is therefore unlikely to achieve sector dominance, but it may reasonably expect to earn a 25-percent market share, or about 25,000 units annually.
Two Wrangler pickups plus a long-wheelbase wagon, similar to the Wrangler Africa concept Jeep prepared for the 2015 Easter Jeep Safari, would make Jeep an instant international player in the light-duty utility market with products measurably superior to the competition and directly addressing commercial, government and NGO buyers.
Add international sales to the domestic HD opportunity and Jeep’s three HD Wranglers would tally 60,000 units or more annually. Total domestic and international demand for the Wrangler family would exceed 425,000 units, enough to satiate Mr. Marchionne, the UAW, and customers around the world.
It’s rare that a manufacturer has a nameplate with the equity, sales tailwind and near empty competitive landscape that currently sits before the Wrangler. The product strategy proposed here would have been risky ten years ago and it may not work if launched ten years from now. Don’t be incremental, FCA. Competition is fierce, success fleeting and markets shift. Leverage the Wrangler opportunity now. Go big!
Seth Parks is a 20 year car industry veteran. Seth’s first job, way back when Broncos still roamed free, was as a lot attendant at a Ford store outside Seattle. He has been involved in the auto industry in one way or another ever since, doing time as a car salesman, finance manager, and sales manager. He later did fleet acquisition and management in Africa and, more recently, he sat on the board of a performance aftermarket auto parts distributor. Seth is presently the CEO of Turbo International, a manufacturer of OE replacement turbochargers for the global aftermarket, and he still loves cars, trucks and pretty much anything with an engine that moves. You can find him on Twitter at mseth_parks.
Twenty year auto industry professional. Currently CEO at Turbo International, the premier American manufacturer of OEM replacement turbochargers for the global aftermarket.
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