FCA to rely on Jeep as it looks to profitability in 2018

17 January 2018

Fiat Chrysler Automobiles (FCA) plans to keep hold of its Jeep brand as it looks to erase its debts and become cash positive by June of this year.

Rumours have been circling since August of a possible takeover of Jeep by a Chinese brand. Initially, Great Wall announced its interest in the manufacturer before backtracking. Recently, Jeep has been subject to new rumours of acquisition by Guangzhou Automobile Group (GAC), whom FCA have partnered with to deliver Jeep models into the Chinese market. However, speaking at the Detroit motor show, FCA CEO Sergio Marchionne dismissed the speculation.

′We’re not going to break up anything. We have no intention of breaking it up and giving anything to the Chinese,’ He said at a press conference.

The company is planning to lean heavily on the Jeep brand as part of its turnaround, especially with the global SUV market growing rapidly. Marchionne believes that one in five vehicles in that market could be a Jeep, which would equate to around five million sales per year.

While the company has no plans to spin out any of its automotive brands, with a decision on whether to turn Alfa Romeo and Maserati into a separate company on hold, Marchionne did confirm that FCA is still looking to turn parts manufacturer Magneti Marelli into a standalone business by the end of 2018. This would unlock value in the overall business allowing the company to return to profit.

FCA has been struggling financially for a number of years, and proposed tie-ins and collaborations with other major manufacturers have not developed, including a proposed merger with US-based General Motors (GM). In December, the manufacturer announced a technical tie-up with Korean brand Hyundai.

However, speaking at the show, the CEO added: ′That problem [the company’s debt] is on the way out. Finishing the year with cash on your balance sheet instead of debt is a big, big step for us.’

The Italian manufacturer, which emerged from bankruptcy protection in the US nine years ago, is targeting revenue of $9 billion (€7.8 billion) by the end of 2018, according to Automotive News Europe. However, while electric vehicles are part of this plan, Marchionne does not believe they will aid profits.

′[Our own range] is a lot further off than people think, in part because they are not profitable for automakers,’ he stated. ′I don’t know of a guy, or a person or an entity or economic organisation that is making money out of selling electric vehicles unless you’re selling them at the very high end, which is rare.’

Marchionne is due to step down from the chief executive position in early 2019, after overseeing a period of growth for the Italian manufacturer, and its merger with the US Chrysler brand. However, while there is speculation that his successor will be appointed from within the company, FCA has yet to announce who will replace him. The CEO will oversee the launch of the company’s new five-year plan, expected in June 2018.

Photograph courtesy of FCA