Fiat Chrysler CEO Sergio Marchionne plans to to retire soon, and he wants to revolutionize the company as one of his final acts. On June 1st, he intends to unveil a sweeping plan that abandons local production of the compact and super-mini cars the Fiat brand is known for so FCA can focus on larger, more upscale, models.
Fiat, the most Italian brand we can think of that isn’t Ferrari, is moving assembly out of Italy. After being emptied, those factories will be repopulated by Maserati and Jeep SUVs. If you think that’s rather bold of FCA, there’s more. There’s also a very good chance the Alfa Romeo Mito and Fiat Punto will be killed off entirely. Thanks to a decade of steadily declining sales, the Punto has transformed from an European staple to a financial liability. It’s hard to imagine the continent without it, but Axing the model admittedly makes good bit of sense.
However, if FCA keeps culling Fiat and Chrysler’s lineup out of existence, won’t it eventually have to change its name?
According to Bloomberg, the big idea is to shift production of Fiat’s affordable cars to countries paying lower wages. The automaker’s hope is that spending less on labor will offset the vehicles’ slimmer profit margins. For example, the Fiat Panda will likely move from the Pomigliano plant near Naples, Italy, to Poland (where the 500 is built). Pomigliano could then be used to build smaller Jeep vehicles with a higher price tag.
While nothing official has been said by the manufacturer, there has been talk that the 500 and Panda could be Fiat’s only survivors under Sergio’s plan. FCA wants to prioritize production of the lucrative SUV segment globally and make room for its more-profitable brands.
Is it just our imagination, or has the automotive industry collectively decided to abandon affordable cars? If Fiat isn’t going to be make small, budget-focused automobiles, there’s no telling who might be next.
And yet again, Toyota thanks you.
Well to be honest toyota is moving small cars to lower wage factories too. Corolla from Canada to Mississippi for instance.
google search for “mississippi toyota hourly rate”
Average Toyota hourly pay ranges from approximately $15.72 per hour for Assembler to $22.03 per hour for Team Leader.
and ca.indeed.com
A production worker $13.13 assembler $23.76, line assembler $20.93
Not sure how up todate that is, or how truthful that is. Also not sure if the same titles mean the same thing.
Or if the Canadian $$$s are in Canadian currency.
If the #s are real, it looks like it might be MORE expensive in the US.
May be I know when they were going to move it to Mexico Toyota stated in an earnings call that their labor costs in north America were highest in Canada, but a lot of that is variable year to year with exchange rates and the costs of benefits in the US.
I caught a snippet on Bloomberg a little while back where Sergio was publicly praised by President Trump for bringing jobs back to the US of A while the other auto execs just sat there, taking it all in.
And a few long-time Silverado buyers I know are willing to at least give RAM a look-see as they consider their next truck.
My BFF told me just yesterday that if his 1993 S-10 dies he will be favoring a RAM MaxCab 5.7L Lariat at the top of his list.
I’ve been extolling on him the virtues of the 5.7L Tundra Limited in CrewMax guise.
But money is a factor. Especially the lack of it.
The Tundra will go out the door for at least $6500 more than any similar RAM, because the discount on the Tundra is only $2500.
Everybody (especially foreign leaders) know that Trump is easily manipulated by flattery.
Don’t confuse playing ball with the mobster-in-chief with Sergio’s actual opinion.
Luke42, sometimes “a bird in hand is better than ten in the bush”, in this case meaning that the accomplishments of President Trump so far have been positive for more American citizens than negative.
I can easily understand the anguish, insecurity, and fear that has developed, and is starting to fester, in non-Americans residing illegally in the US. They are being dealt with, Big League, with cattle calls, roundups and deportations. (Especially in MY border state)
Granted, all that can change and Trump may turn out to be the worst US President ever. But if he can swing denuclearization of the Korean Peninsula, he will be immortalized and up there with Geo Washington, Abe Lincoln, et al.
At one time the worst president was Carter, but the last guy that held the job turned out far worse than even Carter. Even ‘crats said so, publicly.
For many American citizens, President Trump’s vision for America is a refreshing change from the dark ages of 2009-2017 and the redistribution of America’s wealth from the working people to the perpetual free-loading welfare recipients.
Undoing the last guy’s legacy is a welcome development for many tax-paying Americans. And the upbeat economy is just icing on the cake. Gives new meaning to “Happy Days are Here Again” and “Happiness Is……”
I fervently hope that as these collusion investigations continue, more and more corruption of the last administration will be brought out into the sunlight and that vengeance can be extracted on the perpetrators, to the full extent of the law.
I didn’t vote for Trump but I figure God is on Trump’s side. That’s why Trump is president.
Not Hillary.
And I see this as a positive influence on the US auto industry with more jobs coming back to the US.
Yep – Toyota was going to move some of Corolla production to Mexico, but decided to nix that (and in lieu of that, build more pick-ups) and instead, build Corollas at 2 Alabama plants (one new one being shared with Mazda).
Nissan already builds its smaller models, including the Sentra, in Mexico and Honda builds the Fit and HR-V there.
The Toyota Yaris (rebadged Mazda2) is built in Mexico and the NA-spec C-HR is imported from Turkey.
Yeah, it wasn’t the Bush II administration (and long-held Republican policies led by Phil Gramm) which didn’t cause the greatest economic turmoil since the Great Depression.
(Republicans can’t seem to ever learn the lesson – the S&L scandal causing a recession which cost Bush the Elder a 2nd term; ironic since it was Bush who fist spoke of “voodoo economics.”)
So not only did Bush II reinvigorated voodoo economics, the Liar-in-Chief has done so as well and we’re going to see the ramifications and pay the price down the line (well, except for the top 0.1% who will come out of it even better, as usual).
Also, while Carter had his faults (such as trying to micro-manage) he was hit w/ numerous global happenings which had its origins way before him (Middle East oil embargo, Iranian Revolution), plus the US was still paying off the cost of the ill-advised Vietnam War.
While Carter ranks in the latter 3rd for Presidents among historians – Harding, Grant, Buchanan, Johnson, Pierce, Nixon and Coolidge are all ranked as being worse.
As for NK, SK’s President, Moon, laid all the ground-work, it’s up to the Mob-boss to not to screw it up.
@HDC:
Trump’s economic positions are deeply misinformed. Creating trade barriers will reduce the amount of business occurring, which will ultimately create a recession. The only reason the recession hasn’t started yet is because Trump’s team has been too dumb to implement their policies until recently.
As for immigrants, they are the backbone of the economy in the college town where I live, and also in Silicon Valley where my industry is centered. Indian, Chinese, and Hispanic folks are going to be doing a lot of the work in the global economy, and the ID will be better off if they do the work here in the US. Also, anyone who has studies immigration with any rigor thinks that Trump’s policies will be largely ineffective.
As for Hillary, she was a much better choice. Annoying in the know-it-all valedictorian way, yes, but certainly more competent than the bumbling buffoon we have now. Same with Obama — he was extremely competent, except that the Republican congressmen hated him so much that they voted against their own proposals if he signed on. Both Hillary and Obama we’re far better for my economic interests than Trump — and, as a bonus, they could speak in complete sentences.
Trump and the Trump Republicans are charge, though, and so we’ll get to see exactly how recessionary their economic policies will be. The automakers appear to be battening down the hatches for the upcoming storm resulting from torn up trade agreements, incr ased trade barriers, and generally volitile business climate. It’s going to be a wild ride, and not in a good way.
Luke42, you nailed it when you wrote “Trump and the Trump Republicans are (in) charge, though, and so we’ll get to see exactly how recessionary their economic policies will be.”
And FYI, both my parents were LEGAL and DOCUMENTED immigrants to America who became naturalized US citizens, so I am all for LEGAL immigration.
I’m against people overstaying their visa or entering America illegally.
And if you’re interested, I voted for Hillary. The reason was that my wife of 52 years told me that I could forget about getting laid ever again if I did not vote for Hillary.
So when my absentee ballot was filled out, I showed it to her with Hillary checked…. and life continued to be great after that.
HDC,
Not 3 years ago on TTAC you proudly proclaimed you employed illegals. Now you are against them?
Man, do you really believe the sh!t that comes out of your mouth?
Re-read your comments. I think you have nothing and all you have are dreams.
I’m sure Sergio is going to lose sleep over those tens of 500s they sell a month in the US.
He will not sleep well – drinks too much expresso.
Jeep Ram Alfa-Romeo Maserati JRAFM JARRM MARRJ RAJMR JARM MARJ JAMR AMJR RAMJ JRAM ..somethings gotta replace FCA.
FCA = Fiat Chrysler Automobiles. Trucks are automobiles. SUVs and CUVs are automobiles. Jacked up FWD station wagons are automobiles. They won’t change the name.
The key here is divorcing Fiat from its home country, and taking the founding Agnelli family off the hook for what happens to it. Sergio was supposed to find a buyer for Fiat, or a merger partner. He couldn’t do it and lucked out getting Chrysler on the cheap.
What this move tells you is that Ram and Jeep together are viable without a buyer or partner, and that he can pull the plug on Fiat and its low-margin, high-volume segment.
Excising brands and models doesn’t make a company’s market share grow. You can’t shrink your line of products and expect to push your competition out of the way.
Toyota is hugely successful, and makes so many models that they often have duplications in the same segment.
It appears that Sergio is doing this to increase the profitability of the company, but even more so to leave a legacy when he is gone.
Toyota recently killed off the entire Scion brand because it didn’t work.
Next.
You can still get at least two of Scion’s models as Toyotas.
Next.
Fair enough, but the point is that Toyota kills products when it makes sense.
It looks to me like the automakers are bracing for the upcoming global volatility/recrssion by focusing on their core strengths and/or highest margin products.
A company can better survive shocks to the global economy, surprise trade-barriears, and other volatility if they have thick profit margins.
The consequences, of course, is less consumer choice and higher consumer prices. But the companies will survive whatever’s crazy $#!t happens next.
Luke,
If their is a downturn, Chinese, Mexican, Thai, etc vehicles will gain more than larger more expensive vehicles.
If FCA stuck a Jeep badge on Fiat 500s they would be out of stock in six days.
I thought they called that the Jeep Renegade:
https://en.m.wikipedia.org/wiki/GM_Fiat_Small_platform
Hold on, FCA didn’t say it is killing all the small cars, but only that they are moving production to lower cost EU countries like Poland and focusing domestic Italian production on higher margin vehicles.
Unless you bought a computer 100% made in the USA, you have nothing to complain about on this topic.
It’s worth restating the econ 102 principle: trade benefits both parties, or else market participants won’t make the trade.
John,
No one remembers a couple of years ago Sergio pledged to the Italian Government FCA would maintain vehicle prduction in Italy.
I think this has significant bearing on Sergio’s decision.
“Fiat, the most Italian brand we can think of that isn’t Ferrari.” Alfa Romeo still not ingrained? Despite its Giulia?
That’s a lower volume, higher margin “luxury” performance make (in Sergio’s mind). Fiat is the 800 lb. gorilla of the Italian automobile industry, and its stay in in its homeland is ending. That’s the big news.
FCA is now a global auto company, not an Italian one. look around for the reaction in the Italian press. That’s what Sergio was supposed to avoid with a buyer or merger partner, but the Ram-Jeep core of FCA can survive without Fiat or a buyer/partner, so he’s biting the bullet.
By now, the Agnelli clan has become a global rich family less anchored to Italy, so they gave the go-ahead to cut the main cord.
As I have said before, Sergio is a genius. Fiat is dead brand walking. Even in Europe people are buying more and more SUVs. Give people what they want. Build Jeeps everywhere.
Getting Europeans to buy terrible cheap American-branded SUVs will be just as much of a challenge as getting them to buy terrible cheap Italian small cars. Just because they’re buying Qashqais doesn’t mean they’ll buy Jeeps.
Actually so far it’s working fine. They have more then doubled the European market share for jeeps in the last 3 years. March set a record for European jeep sales at 16,000 units.
“Build Jeeps everywhere.”
That’s a great idea if they were mostly built in America. But that is unlikely.
My guess is that they will be build in Italy, China, Poland, maybe the Czech Republic and possibly Hungary where labor is plentiful and under-utilized.
As was pointed out above, the Renegade is basically a Fiat underneath and will sell better and at higher prices in Europe than the 500/Punto. There are larger, higher margin Jeeps that should be attractive to Europeans with higher income too, a segment Fiat doesn’t cover, with a name the Fiat name can’t match.
The Grand Cherokee seems to have appeal. My wife’s sister and her husband shipped their 2014 JGC to Holland where they reside with and take care of his aged his parents.
When I was there last year I noticed a number of JGCs in Holland and Germany, owned by natives, not fur’ners. (You can tell from the plates)
Come to think of it, one of my wife’s distant cousins in Heidelberg brought back a 2012 JGC from when he was stationed at Ft. Bliss, TX, for his German Landwehr 3-year tour.
I think the Jeep mystique extends to countries other than China and the Philippines.
Why would you build Jeep in America? Especially how uncompetitive US vehicles are.
Italy is cheaper than the US right now.
But vehicle production is long term. So maybe you are correct for once HDC, after Trump fncks the US economy the US will truly be a Mexico or China of the World.
All of these moves out of car production open the gate for Chinese producers. China is brimming with new ambitious car companies. After satisfying the internal demand they will export. We will see a lot of under $10K compacts in the next 5-10 years. It’s all good.
basic Japanese and Korean subcompacts are still at 10k mark, the Chinese ones would need to come in wayyy below that to gain a foothold, like 5-6k cheap.
Almost impossible to find any car in US at that price, or will require haggling which first time car buyers generally aren’t great at. 16k seems like a more realistic bottom end nowadays, so there would still be a big market for a 10k new car. Canada does have 10k cars but still hard to find the base trims and most people get upsold to a 20k compact anyway.
“Is it just our imagination, or has the automotive industry collectively decided to abandon affordable cars?”
Today, if you want an affordable car, you buy a used car. Bottom-of-the-barrel new cars are a relic of the era when you couldn’t expect a vehicle to last more than 50-75K miles before needing expensive overhauls, and they didn’t even bother to put a sixth digit on the odometer. They are no longer needed in an era where all but the worst cars can make it 150K-250K miles without breaking the bank. And with more mandatory safety features every year constantly driving up the bill of materials, the economics of low-end cars become less and less tenable.
The majority of buyers would rather buy an off-lease mid-trim compact CUV than a new base-model subcompact sedan or hatch at the same price.
Lease payments on a new car are far less than finance payments on an equivalent or even cheaper used car, and that’s what matters to most people, and why cheap new cars sell.
For the lease payments to stay low there needs to be good resale or it kills profits. small car resale is plummeting and with it super cheap compact car lease deals. You can lease a mid size car for close t the same as a subcompact thanks to the resale issue, and it’s getting worse everymonth.