A 2014 Ram 1500 with the new EcoDiesel power train, launched earlier this year. The diesel-powered Ram 1500 comes with an EPA rating of 28 miles per gallon on the highway. Source: Fiat Chrysler
On May 5, 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 road map 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.
I recently outlined the whole plan and summed up how it will affect each of FCA's brands. Since then, I've been going into more detail on FCA's plans for each of its brands, taking a closer look at the products, strategies, and expansions that the company plans to put in place over the next five years.
Last week I talked about FCA's plans to take Jeep to new markets around the world, to make Chrysler a mainstream American brand built around the all-new 200 sedan, and to emphasize high performance at Dodge in an attempt to win younger buyers. In this video, I explain what FCA has in store for one of its most profitable brands, the Ram truck lineup.
A transcript of the video is below.
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John Rosevear: Hey Fools, it's John Rosevear, senior auto specialist for fool dot com. Last week, the newly merged company that will be called Fiat Chrysler Automobiles revealed its five-year plan. It's an interesting, ambitious plan that -- if it works -- will take FCA, as we're calling them, to 7 million sales a year by 2018.
There are a lot of moving parts to this plan, and they spent a full day last week going through it brand by brand. One of the things I want to touch on is their plan for the Ram brand.
You probably know that Ram used to be just the name of Dodge's pickup truck, but it was separated from the Dodge brand in 2009 and made a stand-alone truck brand. And it has been on a roll since then, its U.S. market share has gone from 11.1 percent at the end of 2009 to 21.7 percent at the end of the first quarter of 2014.
That's a big jump, and to be clear a lot of that gain has come at General Motors' (GM -0.04%) expense while Ford's share has been pretty flat over that time, and it has happened in large part because the Ram pickups have seen some big improvements over the last few years.
And the demographics of the customers that the Ram has been drawing are interesting. In his presentation last week, Ram brand chief Reid Bigland said that the average age of a Ram customer was 52, with a household income of $91,000 dollars, compared to Ford's (F 0.08%) at age 58 and $85,000 dollars and GM's at age 59 and $77,000 dollars. Ram buyers are younger and more affluent than buyers of Ford and GM pickups, and that's something they'll want to build on.
And he also showed a slide that emphasized that Ram is stealing customers from GM, looking at something called the "conquest to defection ratio". Here's what that means: If you trade in your Chevy pickup on a Ram, from Chrysler's perspective you're a "conquest" and from GM's perspective you're a "defector". Over the last couple of years, Ram's ratio versus Ford has been basically even -- customers go from Ford to Ram about as often as they go from Ram to Ford.
But with GM, it was 1.31 in 2012 and 1.39 in 2013. In other words, for every three customers giving up a Ram to buy a GM pickup, there were about four going the other way.
That's impressive. It confirms a lot of what we've talked about in the pickup market over the last couple of years, the sense that Ram has been stealing GM customers -- especially, as we've seen recently, at the lower end of the market.
So what is FCA's big five-year plan for Ram? Long story short they're not going to mess with success. They're bringing a couple of Fiat's commercial vans over from Europe to sell here under the Ram brand, they already offer the Ram Promaster van which is a version of the Fiat Ducato, and that will be joined by the Ram Promaster City, which is based on the Fiat Doblo.
From a corporate organizational perspective the Ram brand is being folded together with Fiat's commercial vehicle operation, which is called Fiat Professional. But the Ram pickups aren't going to change much. The Ram 1500 will get refreshed next year, the Heavy Duties will get refreshed in 2016, and then there will be an all-new 1500 in 2017 and new Heavy Duties in 2018.
They are hoping to see total Ram brand sales in North America go from 463,000 last year to 620,000 in 2018, with a lot of that coming from a more aggressive push into commercial fleet sales, with those vans and with commercial versions of the Ram pickups all the way up to a Ram Chassis Cab. So that's the plan for Ram, not a big dramatic change, more a matter of investing in what's already working and building on their recent success. Thanks for watching.
