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Sticking with its bullish profit predictions for 2018, FCA announced today its fourth quarter earnings for 2017 in which net profits nearly doubled to almost a billion dollars.
With a new Ram 1500 waiting in the wings, the old Ram set to print money while selling alongside the new one, and a healthy Jeep brand serving a public thirsty for crossovers, FCA’s cupboard seems particularly full right about now … so long as the company keeps its focus.
That’s not the trademark TTAC snark, either. Take it from the man himself. On the earnings call, Marchionne — not known for mincing words — went on to warn that much of this year’s performance rests on properly rolling out the redesigned Ram 1500 and Jeep Wrangler. “I think the biggest risk,” he said, “…is that we screw up all those launches and we can’t deliver the volumes.”
While the company will likely be short of the seven million vehicles it projected in 2014 to sell in 2018, there’s a great chance its financial targets will be achievable thanks to the levels of profitability at Maserati, Jeep, and Ram.
Consider it: FCA will have two distinct Rams to sell, both of which are likely to infuse the automaker’s books with scads of cash. It’s doubtful the new Ram will have any cash on its bulging hood during this calendar year, as new customers will rush to showrooms in an effort to sign their name to the note for what is the latest and greatest Ram pickup. I fully expected the 2019 Ram would debut on dealer lots as high-priced, high-margin Crew Cabs in Laramie and Rebel trims; comments from honcho Marchionne seem to confirm it.
Your author also believes that the current-bodystyle Ram will continue to make bank for the company, with its tooling and R&D having been paid for by now. Loyal Ram customers who aren’t cottoning to the 2019’s styling can surely be counted on to step up and buy a new truck before the mini-Kenworth look is gone for good. Fleet sales of workaday 2018-style Rams are also bound to be healthy.
Transaction prices for the Ram pickup, Grand Cherokee, and Wrangler have been marching steadily upward since 2014. With two of those names borne by new machines, there’s little reason to think that trend will stop in 2018. In fact, Marchionne opined that “There’s a very strong likelihood that we will outperform Ford in terms of operating earnings in 2018.”
Bold claims. But, after discarding the Chrysler 200 and Dodge Dart like a rolled up Forbes magazine, the company definitely has the capacity to sell more of these high-margin machines than ever before. The plants that used to make those two sedans have been retooled to make Jeeps and Ram, meaning the company should have plenty of inventory for buyers.
On that same call, Marchionne also said the automaker would show details of its five-year plan at a June 1st event in Balocco, Italy. Marchionne plans to retire early next year after seeing the business plan through 2018 to completion but has said he will not name his successor until after the Balocco meeting. The black-sweatered mogul, who has run Fiat since 2004, has indicated his successor will likely come from the ranks of the automaker’s global executive council.
[Image: Fiat Chrysler Automobiles]
I love to say I told you so.
What good is being top dawg in sales if those sales aren’t profitable? GM learned that lesson the hard way at the turn of the decade.
The situation is a lot different now – GM had to pay the workers whether they worked or not. When your market share falls by 50% and you have thousands of workers that must get paid, sub optimal decisions result.
Ralph Gilles for CEO. Most of the global company’s profits are generated in America by American nameplates; it makes sense to give the helm to an American executive. Makes more sense to give it to an American executive who hasn’t been mentioned in connection with the UAW bribery scandal.
Also wik, Gilles is a B.A. designer and I’d like to see a designer in charge of one of the more daring (at least in recent memory) American car companies.
Also also wik, bring back teh K Car, eh?
Ralph Gilles is the only FCA executive I know aside from Reid Bigland, who’s DQ’d due to scandal and having a porn name for a real name; and Tim Kuniskis, who’s likely Peter-Principle’d out.
I guess Mike Manley is out for the same reason…
Thanks Donald Trump! I think FCA did okay with the dumb Canadian/Italian they have now.
A Møøse once bit my sister…
Good, get that Barracuda line rolling.
This, Mr. Hackett, is how you do it. Take some notes…
Nice news. But I have to say that 5 year plans at FCA don’t mean squat.
*Triggered*
First of all, show me a volume automaker that flawlessly executed (or even published…) a 5 year plan recently.
Second, the product plan exists to serve the business plan and financial goals, which FCA is on target to achieve. So even if certain models don’t materialize or succeed, in the end what matters is the business. Overall FCA is doing just fine. They have issues to address and holes in their portfolio to plug, but to say their 5 year plan doesn’t mean anything when the last 4 years of their current 5 year time frame has been successful is short sighted.
Well I’m not anti-FCA (I own 3 FCA products currently), so whatever on *triggered*
So the last big 5 year plan (2014-2018) included:
–
the 100 to be intro’d in 2016.
midcycle refresh for the 200 in 2017.
a new full size crossover in 2017
the cherokee refresh is about a year behind but it happened I guess.
a new grand cherokee in 2017
the grand wagoneer is supposed to come out next year.
the charger/challenger/300 are all supposed to have a complete redesign next year but that doesn’t look like it’s going to happen.
–
So my point FCA calling their 5 year plan a 5 year plan is sort of generous based on prior examples. It’s been more like a ‘vision board’ with some inspirational posters.
–
I will say that all the new model introductions since the Pacifica have really been killing it in my humble opinion.
The *Triggered* opening was aimed at myself. I’m a sensitive snowflake who doesn’t appreciate it when someone tries to burn my bread and melt my butter.
One significant oil price shock and they are done.
Amazingly, the management of all the major automakers missed this nugget.
Small/ed cars aren’t getting any more popular, or profitable. Regardless of oil price or recession. Trucks and SUVs were still climbing in popularity when fuel was $4/gal in many places.
Should CAFE rules change significantly, perhaps the trend on cars may reverse. No one seems to be banking that they will in that way, though.
Now that CUVs get MPG values that are a gnat’s hiney-hole less than the similarly sized cars they are built off of, I don’t see gas prices changing buying habits back to cars.
This. The major fuel economy differences between modern, car-based CUV’s and similarly-sized sedans just aren’t there anymore.
If a fuel price spike led to any change in buying habits, it would likely just be a move to the smaller CUV classes, which are already booming, with FCA right in the thick of it.
Barring a war, I think everyone in the oil biz sees cheap oil ahead. The US is now the swing producer. Prices get too high and US shale overproduces prices down to earth. Would have to be a significant supply shock to change this new world order. The US briefly became the worlds largest oil producer before the bottom fell out of oil I believe. Its already ramping back up in the $60/bbl range.
I think you are right in the end. Chrysler still is not poised for any change in market conditions even omitting oil as a factor. However, it is well positioned for sale of Jeep and Ram brands. I think it has to happen eventually. Next major downturn for whatever reason, buyers will head to the hills and Chrysler finally goes belly up. They need more scale to survive long term. I still think it makes total sense for a Chinese company with global aspirations.
Rising oil prices alone won’t necessarily hurt CUV/truck/SUV sales. But rising oil prices combined with an economic downturn would do the trick.
Let’s face it – buying more vehicle than you really need (in other words, the whole reason anyone buys anything but a compact or a midsize) is a sign of decent economic times. It’s something of a splurge purchase. If the economy turns sour, people will get practical very quickly. If that happens, FCA has no fall back position/
They better hope the good times keep on rollin’.
@redrocket I think for US buyers FCA may be best set up to handle a shock right now. 2 mild hybrid trucks plus the eco diesel. A hybrid jeep wrangler!?!. A hybrid minivan. The 2.4 is getting reworked. A new 2.0l turbo that apparently is a direct bolt on to basically everything with either their 8 or 9 speed transmissions. The way they’ve gone about their hybridization, they have the new 2.0l, the existing 3.6, and the hemi all set up so they can basically add it in a modest refresh.
Basically, in the last 18 months FCA went from worst to almost first on the vehicles American buying habits favor (big ones).
“But, after discarding the Chrysler 200 and Dodge Dart like a rolled up Forbes magazine, the company definitely has the capacity to sell more of these high-margin machines than ever before.”
If you ask some of the punditry and fanboys, this was the beginning of the end.
It would be interesting to watch them steer a manufacturer into the ground with their pet projects.
A solid recession would have been a disaster for this manufacturer. They don’t have any cheap stuff to fall back on. They got lucky, if you ask me.
…or, they accurately forecast the market.
“…or, they accurately forecast the market.”
Not spending the money to make the Dart or 200 in the first place would have impressed me more.
…or, they got lucky forecasting the market. That could have gone either way.
Wait, I thought FCA sold nothing BUT cheap stuff to subprime buyers. Isn’t that why the Patriot hung on so long, and the Journey is still with us and selling 100K a year?
No news on the new Jeep pickup? I read elsewhere that Jeep is going to target “well-heeled” buyers and apparently Marchionne said he was going to buy one.
So much for the hardcore Jeep/truck buyer yearning for an economical and rugged truck.
The rumor is rugged but not economical Basically should sell for ram crew cab prices. Stripped mid 30’s loaded mid 50’s.
Lou,
If FCA can build a reliable Scrambler with live axles all round, handle and ride at least as well as the XJ, with the V6 diesel I would consider one.
Here’s the big but, I want the interior to be comfortable and not look like some Chinese plastic company built it.
What’s with the repeated use of Forbes magazine similes?
Yesterday: “That model was considered for today’s Ace of Base but was tossed aside like a battered copy of Forbes magazine…”
Today: “But, after discarding the Chrysler 200 and Dodge Dart like a rolled up Forbes magazine, the company definitely has the capacity…”
Less cute, more edit, please.
I have a box full of old Forbes Magazines that I put in my trunk for extra traction in the winter.
Let’s have a huge bonus for Big Serge!
He still has time to make the sale happen, likely triggering a very large payout.
Yes, his bosses want out of the auto business. Now’s the time for the Agnelli family to sell high and invest in other ventures that provide bigger profit margins without the massive capital infusions.
Sergio was supposed to do that a few years ago, but couldn’t find a domestic or European buyer. Now he can sell out to a Chinese car company trying to get into the US market. If he’s really lucky, he might get Toyota to step in to block the Chinese. Toyota could use Fiat to get a bigger piece of Europe and Brazil, and adding Ram would put Toyota on equal footing with GM and Ford. The Jeep volume wouldn’t hurt either
UM… Hello… no mention of us loyal Fiat buyers? I owned a Fiat 500 Abarth. Loved the car and never had any problems with it but hated the seat. I then bought a Fiat 500 X Trekking Plus. It’s a comfy vehicle and since the dealership has fixed the trans I’m loving it.
I was at my Dodge dealer the other day getting my FCA vehicle serviced and while in the waiting area I saw a tattered issue of Forbes on the table.
Put a bow tie logo in the center of that grill and it could easily pass as a new Chevy.IMO.
Stevie Wonder everyone…
Let the good times roll.