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Fiat Chrysler Automotive HQ Workers unveil the Fiat Chrysler sign at Chrysler World Headquarters in Auburn Hills, Mich. The company aims to boost global sales from 4.4 million vehicles in 2013 to 7 million by 2018.
Workers unveil the Fiat Chrysler sign at Chrysler World Headquarters in Auburn Hills, Mich. The company aims to boost global sales from 4.4 million vehicles in 2013 to 7 million by 2018.
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Published: Sunday, 5/11/2014 - Updated: 4 months ago

Fiat Chrysler’s 5-year strategic plan ready to roll

Ferrari, Jeep key players in drive to boost growth

BY TYREL LINKHORN
BLADE BUSINESS WRITER

These are interesting days in the automotive industry.

First off, the world’s most famous sports car company is now building a hybrid. Perhaps even more unfathomable is that the 950-horsepower Ferrari, awash in Italian racing red, made its debut on U.S. soil last week at Chrysler’s headquarters in Auburn Hills, Mich.

The limited-edition supercar served as an exclamation mark to a day that didn’t need one. Fiat Chrysler Automobiles, the parent company of Chrysler, Jeep, Fiat — and yes, Ferrari — had provided plenty of headlines as it laid out an aggressive five-year growth plan of big sales and even bigger investments.

At $67 billion, the automaker’s planned spending for the next five years would buy you 51,000 of those $1.3 million Ferraris — if only they made that many. The plant in Maranello, Italy, has limited production to 499 units.

They’re all spoken for.

Whether Fiat Chrysler can meet its other sales targets is another matter.

In what can only be described as ambitious, Fiat Chrysler intends to boost global sales by nearly 60 percent over five years, from 4.4 million vehicles in 2013 to 7 million by 2018.

“There are parts of the plan that are realistic and feasible. Yet there are other parts that seem extremely difficult to achieve,” said Jesse Toprak, an analyst with cars.com.

While bold, doubling Jeep sales seems within reach as the company adds overseas production and widens Jeep’s lineup to include a small sport-utility-vehicle and a three-row luxury SUV to take on the likes of Land Rover. Other goals seem difficult, but doable, such as molding Chrysler into a mainstream brand with a full-vehicle lineup and growing U.S. sales from about 350,000 last year to 800,000 by 2018.

Marchionne Marchionne
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Then there are those goals that may be out of reach even for Sergio Marchionne, Fiat Chrysler’s larger-than-life chief executive. Can he really take Alfa-Romeo Automobiles SpA, a firm that sold exactly zero cars in the United States, and make it as common here as Audi AG in less than five years?

Mr. Marchionne thinks it can, predicting sales of 150,000 in 2018. Analysts aren't so sure.

“I think that’s going to be a tough one to meet,” said Stephanie Brinley, senior analyst at IHS Automotive. “The perception seems to be ‘If I build it, they will come.’”

The first Alfa, a small sports coupe, is set to arrive in the United States next month. Officials said Tuesday that lineup will grow to eight cars by 2018.

Fiat Chrysler is betting big on the storied Italian brand, pledging to invest nearly $7 billion dollars over the next four-plus years. While the goals for Alfa may be a stretch, analysts think the overall foundation of Fiat Chrysler’s plan is within reach.

“While it’s a very ambitious plan, and I have some questions around certain parts of the plan, I have some faith that they can deliver,” said independent auto analyst Michelle Krebs.

After all, it has been done before. Though the last strategic plan was tweaked here and there, the firm largely delivered on its promises and has enjoyed phenomenal growth.

Combined sales of Chrysler, Dodge, Jeep, Ram, and Fiat vehicles in North America rose from 1.2 million in 2009 to 2.1 million in 2013. Market share is up too, with the firm gaining 2.3 percentage points in North America from the fourth quarter of 2009 to the first quarter of 2014. More impressively, Fiat Chrysler has gained 6.5 percentage points of market share in the U.S. retail market in that time.

To be fair, though, that was against the backdrop of an industry roaring back. Officials expect a much slower pace of growth in North America. The United States is by far the biggest market in North America. Fiat Chrysler sees U.S. sales climbing from 15.9 million vehicles last year to 17 million in 2018.

The firm has much loftier goals for its own growth. With the addition of Alfa-Romeo, officials are calling for a 1 million unit, 48 percent sales increase from 2013 to 2018.

Analysts say they’ll have to work for it.

“To meet the targets they’ve set, they need to make more conquest sales and they need to steal share from other people, and that’s a harder game than taking the increases that are coming with the market,” Ms. Brinley said.

One of the keys to the company’s plan in North America and particularly the United States is better defining each Chrysler Group brand and reducing competition within its own showrooms. That starts with the elimination of the Dodge Avenger, which will allow the Chrysler 200 to go on as the company’s sole mainstream midsize car. Also gone is a Dodge minivan. The Jeep Patriot and Compass will be consolidated into a single model.

Company executives want to cement Dodge as a performance-based brand. That gets a boost right off the bat, as SRT goes away as its own brand, rolling the Viper back into Dodge’s stable.

“We've cleaned up all the duplicity and misunderstandings about these brands,” Mr. Marchionne said. “I think we’re in execution mode now. The visible signs to whether we make it or not are not that far away.”

Though the company is projecting slightly lower sales for Dodge because of the changes, Ms. Krebs believes the company could reap higher revenue even as it sells fewer cars.

Fiat Chrysler anticipates growth in all its worldwide markets but says the most explosive growth will come from Asia, where the company expects to grow sales from 200,000 last year to 1.1 million in 2018. Much of that will come from Asian production of Jeeps. The company plans to add production in India and China. According to product plans, a Chinese version of the Cherokee will go into production there next year.

Though that will take the title away from Toledo as the only place on Earth to build the Jeep Cherokee, it isn’t likely to have much affect. Production continues at a rapid pace, and according to forecasts, at least half of all U.S. Jeep production will continue to be in Toledo.

“We’re in a wonderful spot here in Toledo,” said Bruce Baumhower, president of United Auto Workers Local 12. “The good news for us is they’re going to continue to invest in our products that we’re building.”

The company is making it a priority to keep products fresh, having planned updates for the Cherokee in 2016. A new Wrangler arrives in 2017.

“There’s not any loss coming out of Toledo in production, and there’s not any gain at this point,” Ms. Brinley said. “It does speak to the commitment of this manufacturing area as a pillar, a platform, a strong base for the company going forward. There’s some security in knowing where this manufacturing footprint fits within the organization, but it doesn’t look like growth.”

The plan didn’t address the company’s capacity issues with Wrangler. Chrysler barely can keep up with orders of the SUV and routinely has been setting monthly sales records.

However, true to his word, Mr. Marchionne’s plans don’t call for building the Wrangler anywhere else.

Mr. Baumhower said the plant exported about 40,000 Wranglers last year. As the vehicle is introduced to new markets, that number rise.

Contact Tyrel Linkhorn at tlinkhorn@theblade.com or 419-724-6134 or on Twitter @BladeAutoWriter.



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