Fiat Chrysler (FCA) to Keep Production of Next- Generation Jeep Wrangler in Toledo 02-Sep-2015 11:32 GMT News Investments

Fiat Chrysler (FCA) to keep production of next- generation Jeep Wrangler in Toledo 02-Sep-2015 11:32 GMT News Investments

Moving production of the Jeep Cherokee out of the Toledo plant

Fiat Chrysler Automobiles (FCA) has decided to keep the Jeep Wrangler at its assembly complex in Toledo, Ohio, United States, as well as to add a Jeep pick-up at the facility and to move the Cherokee's production to a different plant, according to an Automotive News interview with FCA CEO Sergio Marchionne. The executive said, "It doesn't take a rocket scientist [to know] that the only way I can move around the Wrangler is to move it into the other Toledo plant."

The Toledo complex includes a smaller body-on-frame plant that builds the Wrangler and a larger unibody plant that builds the Cherokee. Jeep will be able to keep production of the current Wrangler going at the body-on-frame assembly, putting the new Wrangler into the unibody plant as it is converted to body-on-frame.

Marchionne also suggested that the solution could enable retooling of the Warren assembly plant, Michigan, which builds the Ram. "We still have Warren that's not fixed from a manufacturing standpoint. I can't take down a day of Wranglers and I can't take down a day of trucks. So I need to move them around."

Though not confirmed by Marcionne, Automotive News reports that FCA will build a "Wrangler-based pick-up", and that production of the Wrangler and its pick-up variant is targeted at 350,000 units per annum at the Toledo complex.

Outlook and implications

As Marchionne indicated during his interview, this arrangement will enable production of the current Wrangler to continue while the current Cherokee plant is being prepared and production of the new Wrangler begins − important for a high-margin product that is supply-constrained in terms of sales. Plans for a Jeep pick-up indicate the brand will move into the small pick-up segment, leveraging the premium pricing and lifestyle image that Jeep can bring to the equation, adding a product that harks back to Jeep's history. The Cherokee's production may be moved to a plant in Belvidere, Illinois, or Sterling Heights, Michigan, both of which are currently underutilised.

That Wrangler is staying in Toledo does not come as a surprise, while the Automotive News report indicates that Jeep will move forward with the pick-up and that the company plans to move production of the Cherokee. Regarding the new home of Cherokee production, Marchionne did not identify a plant, other than to say it would be in a "nearby state". Both FCA's plants in Belvidere, Illinois, and in Sterling Heights, Michigan, are viable options. Sterling Heights assembly plant currently builds the Chrysler 200 and Belvidere builds the Jeep Compass and Patriot and Dodge Dart. While not confirmed, a solution may be to move the Dart to Sterling Heights, again putting the company's Dodge and Chrysler sedans together, and installing only the Cherokee at Belvidere. Which solution FCA has determined is not confirmed.

The information contained in this presentation is confidential. Any unauthorized use, disclosure, reproduction, or dissemination, in full or in part, in any media or by any means, without the prior written permission of IHS Markit or any of its affiliates ("IHS Markit") is strictly prohibited. IHS Markit owns all IHS Markit logos and trade names contained in this report that are subject to license. Opinions, statements, estimates, and projections in this report (including other media) are solely those of the individual author(s) at the time of writing and do not necessarily reflect the opinions of IHS Markit. Neither IHS Markit nor the author(s) has any obligation to update this report in the event that any content, opinion, statement, estimate, or projection (collectively, "information") changes or subsequently becomes inaccurate. IHS Markit makes no warranty, expressed or implied, as to the accuracy, completeness, or timeliness of any information in this report, and shall not in any way be liable to any recipient for any inaccuracies or omissions. Without limiting the foregoing, IHS Markit shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with any information provided, or any course of action determined, by it or any third party, whether or not based on any information provided. The inclusion of a link to an external website by IHS Markit should not be understood to be an endorsement of that website or the site's owners (or their products/services). IHS Markit is not responsible for either the content or output of external websites. Copyright © 2021, IHS Markit®. All rights reserved and all intellectual property rights are retained by IHS Markit. While Marchionne has said for months that he preferred the Wrangler to stay at Toledo, he suggested that he had other options. The new Wrangler is also expected to significantly increase FCA's use of aluminum sheetmetal, which will increase the necessary plant investment. This plan addresses the FCA concern over loss of Wrangler sales during a prolonged model changeover, as the current iteration of the SUV is in a supply-constrained sales environment and brings healthy profit margins.

A Jeep pick-up has been suggested by several concepts over the years, and is likely to be met with great enthusiasm. One Jeep truck concept, Gladiator, used a Ram 1500 frame base, with Jeep Wrangler styling. Automotive News reports that the Jeep pick-up will be Wrangler-based and that is also what IHS Automotive's production forecast indicates. IHS forecasts production of the compact pick-up will reach about 35,000 units per annum in 2019, after going into production in 2018 − this would be in comparison to production of 221,000 Toyota Tacomas and 108,000 of the General Motors twins in 2018, indicating that the Jeep pick-up is expected to be a relatively small player in the pick-up segment. It is likely that Jeep could command a premium, however, that a Ram compact truck could not. That premium would result from both the Jeep image and that Jeep would not have a full- size truck offering to balance its price ladder against. The next-generation Wrangler SUV is forecasted for production in 2017.

Jeep could be well positioned to tap into the resurgence in smaller pick-up trucks sparked by the Chevrolet Colorado and GMC Canyon duo, perhaps better positioned than Ford's consideration of adapting the global Ranger and installing production of that vehicle at Ford's Michigan assembly plant. However, among the potential risks of the smaller pick-up is the chance for a sports-car-like hockey-stick sales performance. Interest in a Jeep pick-up does seem to be extremely high, but once those who believe they want one get it, the question becomes who else will wants one.