Whatever Trump Decides, Fiat Chrysler's Prepared for What Comes Next
Without a functional plan, each episode of the A-Team would have ended with four funerals. For Fiat Chrysler, however, the solution to its problem doesn’t involve welding armor plating to a series of scrapyard vehicles while the guy from Breakfast at Tiffany’s lays down covering fire with a Ruger Mini-14.
FCA’s main concern involves the current occupant of the White House, and what his proclamations could mean for the automaker’s bottom line. A 25-percent tariff on imported vehicles could erase nearly a billion dollars in profit each year.
Don’t worry — FCA’s working on a plan.
A series of plans, actually; the development of which started the moment President Trump took the oath of office, apparently. It’s anyone’s guess what the trade landscape will look like in a year’s time. Certainly, Trump signalled his intentions quite clearly during his campaign, but the likelihood of new tariffs and a diminished or obliterated NAFTA seems more plausible with each passing day.
Speaking to Automotive News Europe, Bob Lee, FCA’s head of engines and electrified powertrains, said nothing’s being left out of the conversation. Lee sits on CEO Sergio Marchionne’s 25-member Group Executive Council.
“It’s contingency planning on a massive scale — supply-based planning, logistics planning, vehicle-build location planning,” Lee said. “This is not trivial, and it’s been going on for awhile.”
As we told you earlier, FCA stands to take a major hit if and when auto tariffs start flying. Some 9 percent of the vehicles it sells in the U.S. have their origins outside the country’s borders. The Jeep Renegade, imported from Italy, is especially vulnerable.
Should Trump impose tariffs only on European Union-built vehicles, FCA has a solution: its Brazil assembly plant, which also builds the Renegade. Should those tariffs be imposed on all foreign-built vehicles, well, FCA’s boned. The automaker would have to consider making the model a less-prominent vehicle in its lineup.
As for moving more production into the U.S., which is what Trump desires, that’s a far more difficult and expensive solution. Assembly plants don’t just spring up out of the ground overnight. The White House could easily have a new occupant by the time a plant nears completion, which is why automakers, both domestic and foreign, are busy playing the wait-and-see game.
For FCA, a company whose domestic production capacity is nicely maxed out, building a new assembly plant would work against its existing goals. The automaker’s profit-boosting, debt-reducing plan is well underway, with the company on track to become cash-positive by the end of the year.
Marchionne wants to retire on a high note. He also hopes to attract the interest of another large automaker with an urge to merge, and you can’t be strapped for dough while courting a suitor. Unplanned expenditures would throw the current plan into disarray, but so too would tariffs.
[Image: © 2018 Matthew Guy]
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