FCA taps the brakes on big-ticket trucks

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Automotive News  /  December 12, 2016

Grand Wagoneer, redesigned Ram heavy-duty pickup delayed

Fiat Chrysler dealers will have to wait a bit longer for two highly anticipated big-ticket vehicles: a fully redesigned Ram heavy-duty pickup and a luxury SUV for Jeep, the Grand Wagoneer.

Sources told Automotive News that FCA's Ram brand will not redesign its current heavy-duty pickups onto its new DT pickup platform in 2018 but instead will keep the same body-in-white and refresh the existing DS-based model.

Meanwhile, the automaker has placed a hold on its development of the Jeep Grand Wagoneer luxury SUV, supplier sources say. The vehicle has been on Jeep's product plan since 2014 and was to boast three rows of seats and a six-figure price tag.

It is unknown why these actions on important products for FCA's two most profitable brands are taking place; FCA has refused to comment.

The automaker is in a financial race to erase nearly $7 billion in net debt that was on its books at the end of the third quarter. CEO Sergio Marchionne has said he plans to retire in 2018 and wants to leave the global automaker generating billions of dollars in free cash flow annually.

To do that, the company is, in part, undergoing a major revamp of its North American manufacturing footprint in order to build more Jeep and Ram SUVs and pickups and fewer slow-selling sedans. It has also spent billions of dollars to resurrect the Alfa Romeo premium sport brand, introducing a new Giulia sedan and Stelvio crossover, neither of which is on sale yet in the U.S.

Through the first nine months of 2016, FCA said it had generated $1.49 billion in global profits.

Saving cash

Delaying or abandoning its plan for what FCA called in 2014 a "major update" of its heavy-duty Ram 2500 and 3500 pickups in 2018 will save FCA money on a changeover of its heavy-duty pickup plant in Saltillo, Mexico. Saltillo is FCA's only heavy-duty pickup factory, so keeping the current truck going with only a freshening will also ensure that Ram heavy-duty pickups remain available to dealers in an uninterrupted supply.

But the delay will also leave the Ram 2500s and 3500s with a significantly older design than their heavy-duty competitors from top rivals Ford and General Motors. Ford, for example, just redesigned its heavy-duty pickups this year, boasting improved towing capabilities and better fuel economy.

In its five-year business plan presented in May 2014, Ram had forecast what it called a "major update" for its heavy-duty pickups and chassis cabs in 2018. FCA has since dramatically altered its business strategy, abandoning U.S. production of low-profit cars to focus primarily on building more pickups and SUVs, taking advantage of sweeping changes in consumer preferences.

The DS-based Ram 2500 and 3500 pickups were first introduced in 2010. They have been refreshed to various degrees in the intervening years, expanding their capabilities amid a customer base that is about 75 percent commercial, according to the brand's 2014 business plan.

FCA reports combined sales of light-duty and heavy-duty Ram pickups each month, and said in 2014 that about a quarter of the brand's pickup sales are heavy-duty models. Through November, Ram pickup sales are up 8.1 percent.

'$140,000 Jeep'

The development hold on the Jeep Grand Wagoneer is surprising in part because FCA executives have been unusually forthcoming about the vehicle compared with the company's usual practice of refusing to comment on future product plans.

In late June, Jeep brand head Mike Manley told reporters that the Grand Wagoneer would push the premium boundaries of the SUV brand. He elaborated at the Paris auto show, telling reporters that pushing the Grand Wagoneer "up to $130,000 to $140,000 may be possible."

The Grand Wagoneer was initially scheduled to be launched in 2018 but was pushed back last year to 2019 so the vehicle could be co-developed with the next-generation Jeep Grand Cherokee, Marchionne said last year.

The key to the Grand Wagoneer's most recent delay may lay in the constraints FCA is under with its North American manufacturing plants and the company's ongoing product shift away from passenger vehicles.

During its negotiations with the UAW in 2015, FCA unveiled a product plan that called for the unibody Grand Wagoneer to be built at the company's Warren Truck Assembly plant, after that plant's product, the Ram 1500 pickup, was redesigned and moved to the nearby Sterling Heights Assembly plant.

But building the Grand Wagoneer at Warren would require the plant to be completely retooled from body-on-frame assembly to unibody assembly. That's a large added expense for an automaker already paying to retool two unibody assembly lines at Sterling Heights and in Toledo, Ohio, in 2017 to body-on-frame production.

FCA already builds a three-row crossover -- the Dodge Durango -- off of the current Jeep Grand Cherokee platform at its Jefferson North Assembly plant in Detroit. That plant's capacity is already maxed out, however, meaning FCA could not easily add another product there without incurring major expenses or disruptive production changes.

Prior to being run by Fiat, Jeep produced a three-row, high-end SUV off of the Grand Cherokee platform, the Jeep Commander. It did not sell well, suffering in part because its third-row seating lacked sufficient legroom. Marchionne hated the Commander as well, telling reporters in 2011: "That car was unfit for human consumption. We sold some, but I don't know why people bought them."