Here’s why the company has some serious soul searching to do:
1. GM Doesn’t Want to Merge
Recently, FCA CEO Sergio Marchionne made it known that he’s interested in the idea of a merger with General Motors. The other giant American automaker isn’t interested, however, despite FCA’s eagerness to find a partner. GM executives won’t even entertain the idea, even though Marchionne says the merger would be too good to ignore.
2. FCA is Lagging Behind Competitors
Looking at the big picture, FCA is behind its main competitors in numerous categories including profit margin, R&D spending, fuel economy, hybrid technology, autonomous driving and more. But according to Marchionne, the automaker isn’t desperate at all and he believes the company can survive on its own “in mediocrity.” Naturally, Marchionne prefers not to have FCA operating in mediocrity and would like a partner that would benefit from a mutual relationship.
3. Most of FCA’s Models are Outsold by the Competition
The only glowing part of FCA’s portfolio currently is the Jeep Wrangler, Cherokee and Grand Cherokee. Those three models are the only ones out of 23 offerings from FCA US that aren’t outsold by a segment competitor.
4. Margins are Still Down
And despite taking dramatic steps to increase profit margin in North America, FCA’s margins still remain well behind its competitors even though it has increased wholesale prices in the U.S.
5. Platforms are Old
Perhaps one of the main reasons why FCA is struggling with sales is that many of the company’s top-selling vehicles are still built on platforms that would widely be considered antiquated by other automakers. For example, the current Dodge Charger, Challenger and Chrysler 300 are all based on a Mercedes-Benz platform that was first used in the 2005 model year. In an age where automakers are moving onto lighter weight, more versatile platforms, FCA lags behind its competition with new technology.
6. Manufacturing Costs Are Too High
In fact, there isn’t a single FCA platform that underpins over one million vehicles a year, which increases costs for manufacturing. Currently, all FCA platforms are reworks of architectures that Marchionne found when he joined Fiat in 2004, prior to taking over the bankrupted Chrysler in 2009. To meet crash standards for those platforms, each new model became heavier than its predecessor, meaning worse fuel economy, especially since most automakers are moving forward to lighter weight platforms and lightweight materials such as aluminum. Over the recent years, the weight disadvantage has continued to increase since no new platforms are being developed.
7. Fleet MPG Sucks
Last year, the FCA’s U.S. fleet averaged 21.1 mpg, which is last among all volume automakers in corporate average fuel economy. The current leader is Nissan, which has a corporate average fuel economy of 26.8 mpg. Even more ironic, the only hybrid that you can purchase from any of the company’s 11 brands is the $1.4 million LaFerrari, which we all know is hardly a car that has fuel economy as its main priority. There is, however, the Fiat 500e that’s offered in California and parts of Oregon, but even Marchionne himself has said that he hopes no one purchases it since the company loses about $14,000 per Fiat 500e sold.
8. FCA Needs to Boost Global Operations
Looking at the global market, FCA is still the sum of four regional and marginally interconnected regions, and sales are shrinking in Brazil and the company has a very minor presence currently in the Asia-Pacific. Other automakers including Toyota, GM, Ford and Hyundai all have strong presences overseas, especially in China.
9. No Progress with Autonomous Driving
FCA is also one of the few automakers that have made no progress with connected cars and autonomous driving, technologies that Marchionne calls a Pandora’s box of problems.
10. More Debt Than Cash
Lastly, FCA has a net debut of $8 billion, while every other company is in a net cash position.
Marchionne attributes some of the company’s issues to Chrysler’s former debt, having bought out the UAW’s Voluntary Employees’ Beneficiary Association with $11 billion in cash and having to repay the government loans. FCA has also had to invest billions into modernizing the factories previously held by Chrysler’s former owner, Cerberus. The CEO acknowledges that the company has work to do in catching up with hybrids and electrification, which will start with the next-generation Chrysler Town & Country minivan next year.
[Source: Automotive News]
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