After striking out previous year in his search for a merger partner, Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne has chose to spend almost $1 billion to boost the company’s focus on what it does best: pickup trucks and sport-utility vehicles.
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The move to abandon the mid-size sedan market is surprising but FCA believes consumer interest in crossovers represents a “permanent shift in demand”.
Marchionne said the company will make cars and trucks more efficient by introducing more electric-driving solutions. Ford is moving production of the Focus and C-Max small cars from its MI plan to Mexico U.S.in 2018, a shift that makes room for new pickups and SUVs.
A slowdown in demand for imported cars in China was also unexpected, Marchionne said.
The Brampton plant probably needs an investment in a new paint shop if it’s going to win a mandate to build new vehicles, but FCA could simply extend production of the current cars, said industry analyst Joe McCabe, president of consulting firm AutoForecast Solutions LLC.
“Brazil came out of left field and left most of us staring at uncertain market conditions”, Marchionne said in a conference call with analysts.
Parts makers who supply the Sterling Heights and Belvidere plants may be affected, Volpe added. Although revenue soared substantially during the quarter, the company fell short of earnings estimates on the back of woes in Asia and Latin American markets. It will be joined in the lineup by a new midsized SUV by the end of 2017, but other vehicles – a full-size sedan, two CUV or SUVs, two “specialty vehicles” and a hatchback – won’t appear until between 2017 and 2020.
FCA reports 2015 finished “well in excess of guidance” with revenue at €113 billion ($123 billion) and adjusted net profit topping €2 billion ($2.2 billion).
The 2015 results included Ferrari, which was spun off from its mass-market parent at the start of this year. Under that contract workers will receive $800 for every 1.0% of profit margins generated by FCA’s North America region.
Fiat Chrysler’s shares fell 2 percent to close at $7.45 on the New York Stock Exchange.
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