Fiat Chrysler Automobiles NV’s Jeep brand chief said Friday a redesign of its Grand Cherokee sport utility will be delayed by at least a year, intensifying the challenges Chief Executive Sergio Marchionne faces in his quest for a partner.
Jeep brand chief Mike Manley confirmed FCA’s decision to push back the launch of a redesigned Grand Cherokee to late 2018 or to 2019 from late 2017. That delay is one of at least a dozen current or new vehicles in North America reported by Reuters.
FCA said the delays are not related to a shortage of money, but dealers could still wait longer for vehicles with fresh designs and technology at a time when rivals plan to launch new models at a faster pace, according to a Bank of America report which noted that the market share gains FCA has targeted “appear unlikely.”
FCA’s ability to keep up in an intensifying auto technology race is a critical question for potential merger partners, analysts and industry executives said. Marchionne has reached out to General Motors Co <gm.n> CEO Mary Barra, proposing a merger. But Barra rebuffed him, saying earlier this month that GM could do better by “merging with ourselves” to improve economies of scale, respond to tougher fuel economy standards and meet consumer demand for digital connectivity and advanced safety features.
FCA would bring to any merger a U.S. model lineup that ranks last in fuel economy among major automakers, performs poorly in measures of quality, and has a higher than average dependence on consumers who rely on subprime loans, according to non-public data compiled by J.D. Power and reviewed by Reuters.
FCA’s Chrysler brand sold 26 per cent of its vehicles using subprime financing. The industry average is 12.7 per cent sales to subprime borrowers. FCA’s Jeep and Ram brands are both below that level.
FCA spent 1.5 per cent of its annual revenue on research and development last year, compared with 4.8 per cent for Ford and 4.7 per cent for GM, according to non-public data shown to Reuters by a source on condition of anonymity.
FCA’s North American profit margins last year were 4 per cent, roughly half of those reported by GM and Ford. FCA said it plans to boost North American margins to 5.5 per cent to 6 per cent this year, still below the levels its Detroit rivals are projecting.
The world’s No. 7 automaker lags its rivals in the race to hit the U.S. fuel economy target of 54.5 miles per gallon by 2025. In 2014, FCA’s U.S. fleet averaged 21.1 miles per gallon, last among major automakers and nearly 8 miles per gallon behind the leading company, Japan’s Mazda Motor Corp <7261.T>.
Gualberto Raineri, FCA’s chief spokesman in North America, said the company has been confounding sceptics since Fiat took over management control of Chrysler in 2009, and paraphrased Mark Twain: “The report of my death was an exaggeration.”
Marchionne has argued that global automakers must consolidate to shoulder the rising costs of investment for new technology. He said Wednesday FCA is making “huge progress,” but that progress “is costing us.”
(Reporting by Bernie Woodall; Additional reporting by Agnieszka Flak; Editing by Joseph White and Richard Chang)
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