Fiat Chrysler Automobiles Is Making a Massive Bet on Jeep

FCA is counting on the all-new 2015 Jeep Renegade to introduce the venerable SUV brand to new markets around the world. Photo credit: Fiat Chrysler 

Last week, senior executives at Fiat Chrysler Automobiles (NASDAQOTH: FIATY  ) spent a full day briefing analysts and media on the company's plans for the next five years.

This is a big deal. Newly merged FCA's global product portfolio is currently a messy mash-up, with many areas of overlap -- and several important market segments where the company has no strong offerings at present.

This plan is CEO Sergio Marchionne's roadmap for changing that. If it's successful. FCA will be transformed into a thriving, competitive, substantially more profitable global automaker.

But that's a big "if". The plan is ambitious and expensive, and FCA is not exactly rolling in cash at the moment. There are reasons to be optimistic, though, starting with this: Marchionne's last five-year plan was also seen as overly ambitious -- but Fiat and Chrysler largely delivered on its goals.

Last weekend, I outlined the whole plan and summed up how it will affect each of FCA's brands. This week, I'm going to go into more detail on FCA's plans for each of its brands, looking in more detail at the products, strategies, and expansions that the company plans to put in place over the next five years.

Why FCA's hopes are on Jeep
Jeep brand chief Mike Manley said that Jeep will be FCA's "lead global brand". This is perhaps the biggest news from last week: FCA is starting an aggressive push to establish the venerable SUV brand as a major market presence all over the world. 

Why? Simple: SUV sales are booming all over the world. And Jeep is still an enormously strong brand, one that's widely known -- and one that is associated entirely with SUVs. What's more, Jeep's current product portfolio is already in pretty good shape. The current Wrangler and Grand Cherokee are selling well, the new midsize Cherokee is off to a strong start, and the new small Renegade gives Jeep a strong entry in the booming small-SUV segment.

FCA is betting that it can use that brand strength and Jeep's current product portfolio-starting with the new Renegade -- to open doors in new markets around the world. But FCA isn't planning on changing the Jeep brand: The Wrangler will continue to be Jeep's centerpiece, and all other Jeeps will be offered in Trail Rated versions. 

A hoped-for 138% increase in global sales 
New assembly lines in Brazil, Italy, India, and China will push total Jeep production to 1.9 million vehicles a year by 2018. (That's up from just under 800,000 Jeeps last year.) That assumes that Jeep sales will grow at a 20% annual rate.

That's an ambitious assumption. Manley pointed out that Jeep grew at an average annual rate of 24% between 2009 and 2014, as U.S. sales boomed and exports grew. But further U.S. growth is likely to pretty limited: What will drive those big growth numbers over the next five years?

Mostly not the U.S., Manley said. And mostly not from additional models, as you can see in this slide from Manley's presentation.

Source: Fiat Chrysler

As you can see, the vast majority -- 64% -- of the hoped-for growth for Jeep will come from "localization", or the process of establishing Jeep around the world.

FCA divides the world into four regions: North America, or "NAFTA"; Latin America, or "LATAM", Europe, the Middle East, and Africa, or "EMEA"; and the Asia-Pacific region (including China and India), or "APAC". 

Manley expects Jeep sales to grow by less than 10% a year in NAFTA -- essentially, they'll grow along with the overall U.S. market. But he sees the brand growing by more than 50% in Latin America, about 45% in Asia, and about 35% in the EMEA region.

The thinking is that SUVs are a growing segment all over the world, and Jeep has the brand strength and products to capture a (significantly) outsized share of that growth. Leading that charge will be the all-new Renegade, Jeep's smallest offering -- and one that's aimed squarely at younger buyers.  The Renegade is extremely important: Rivals like Ford's  (NYSE: F  ) EcoSport and General Motors'  (NYSE: GM  ) Opel Mokka have been racking up big sales gains in overseas markets. The thinking is that the Renegade, an honest-to-goodness Trail Rated Jeep, might bring something to the segment that no other rival can match: Genuine off-road credibility.

A lot of Jeeps, but not a lot of new Jeeps
As I said, FCA isn't counting on new products to drive Jeep's global growth. Jeep's product portfolio won't change significantly in coming years, as you can see in this slide from Manley's presentation.

Source: Fiat Chrysler

New models? Just a couple: The Patriot and Compass will be replaced by a single all-new model in 2016, and the long-rumored big Jeep SUV, the three-row Grand Wagoneer, is in fact coming -- but not until 2018. (Yes, Jeep fans, they confirmed the Grand Wagoneer name last week.) 

Meanwhile, subtle tweaks and an occasional overhaul will keep Jeep's other products fresh. The Grand Cherokee will be refreshed for 2015, the new-last-year Cherokee will be freshened for 2016, and the brand-new subcompact Renegade will get a refresh in 2017. Also in 2017, the Wrangler and Grand Cherokee will be substantially overhauled. 

The upshot: Jeep isn't changing, it's just going global
As any Jeep enthusiast will tell you, the Wrangler is the most important product, the one that sets the tone and standard for all of the others. That won't change, Manley said. Nor will Jeep move away from its recent approach of assuring that every model is available in a "Trail Rated" version with solid off-road capability.

Long story short: Jeep's global expansion is the centerpiece of FCA's five-year plan. The hope is that Jeep will account for about a third of the company's total global sales by 2018. 

Can they get there? It seems plausible -- more plausible than some of FCA's other plans, because of the strength of the Jeep brand and the fact that Jeep's product portfolio is already in pretty good shape. But much will depend on how well Chinese buyers react to the Jeep brand. We'll find out.

Yes, SUVs are back! Here are 3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2954115, ~/Articles/ArticleHandler.aspx, 9/4/2015 4:15:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

John Rosevear

John Rosevear is the Fool's Senior Auto Specialist. John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007.

Today's Market

updated 6 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:00 PM
F $13.84 Down -0.03 -0.22%
Ford CAPS Rating: ****
FIATY $0.00 Down +0.00 +0.00%
Fiat S.p.A. (ADR) CAPS Rating: ****
GM $29.11 Down -0.10 -0.34%
General Motors CAPS Rating: ***