What's working for Fiat Chrysler Automobiles (NYSE: FCAU) right now? Jeeps, Jeeps, and more Jeeps.
Sales of Jeeps -- three new Jeeps in particular -- helped push FCA to an 11% sales gain in May. In fact, they more than "helped": Booming demand for those Jeeps has helped FCA overcome some glaring weaknesses elsewhere in its product portfolio.
What's working for FCA: 3 new Jeeps (and pickups)
FCA has been selling just about every Jeep it can make for a while now. What has changed is that it can now make more Jeeps than ever, thanks to a major reshuffling of its North American assembly lines -- and it has some all-new models that have stoked that already-high demand.
Here's the backstory: The midsize Jeep Cherokee used to be built in the same factory complex in Toledo that builds the Jeep Wrangler. It's now built in Belvidere, Illinois at a factory that used to build the now-discontinued Jeep Patriot and Dodge Dart sedan alongside the compact Jeep Compass. FCA moved production of the all-new Compass to Toluca, Mexico -- and it retooled the Cherokee's old assembly line in Toledo to build the all-new Wrangler.
Got all that? If not, no worries: The upshot is that FCA can make more Wranglers, Compasses, and Cherokees now than it could a couple of years ago. Add in the fact that the Compass was all-new for 2017, the Wrangler is all-new for 2018, and the Cherokee has been significantly revamped, and you can see the results:
Data source: Fiat Chrysler Automobiles. Year to date sales are through May; comparison is to the same period in 2017.
Any way you slice them, those are big sales numbers. Here's some context: Ford Motor Company sold a total of 91,495 Explorers in the U.S. this year through May.
FCA is also getting some help from its Ram pickups. The company is in the process of rolling out an all-new Ram, but it will also continue to sell the old model (with big discounts) alongside the new one for several more months. While the new Ram's launch has had some snags, the older Rams have kept FCA's overall pickup sales strong: Ram pickup sales rose 4% last month.
The compact Jeep Compass was completely redesigned for 2017. It's much improved, as are its sales. Image source: Fiat Chrysler Automobiles.
What isn't working: Most everything else
While Jeep-brand sales were up 29% last month, and the Ram pickup held its own, FCA is having a tough time elsewhere. Chrysler-brand sales were off 18%, as demand for the Pacifica minivan has faded a bit and the elderly 300 sedan is finding few buyers.
Dodge's value-priced Caravan and Journey did well, thanks to big discounts, and Challenger sales rose slightly. But the brand's other mainstays, the Durango SUV and Charger sedan saw sales decline 15% and 9%, respectively, from a year ago.
FCA isn't completely abandoning car models. The brawny Dodge Challenger is thought to be very profitable, especially in high-performance trims. But it's a decade old, and sales aren't growing. A new version is in the works. Image source: Fiat Chrysler Automobiles.
Even some Jeeps struggled, relatively speaking. Sales of the big Grand Cherokee were up just 4% from a year ago, and sales of the little Renegade fell 4%.
Most of the FCA models that have lost ground have something in common: They're old. Without big discounts like the Caravan and Journey have received, they're hard to sell. An all-new Grand Cherokee and heavily revamped versions of the Charger and Challenger are on the way, FCA confirmed last week. But several other models (the 300, the Caravan, possibly the Durango and the Journey) may soon be put out to pasture as FCA's factory shuffles continue.
On the Italian side of the house, Alfa Romeo sales were up, thanks to the new Stelvio SUV, but Alfa's total sales are still tiny. Meanwhile, demand for the little Fiat 500 has fallen off a cliff: Fiat's total sales were down 46%.
The upshot: FCA has made progress, but there's more to do
The good news is that CEO Sergio Marchionne's plan to boost profitability in North America is working, thanks to that super-strong Jeep demand. The all-new Ram will start to help once supplies grow later this year.
But there's still more to be done. The new products that are known to be under development (an all-new Grand Cherokee, two additional new upscale Jeeps, and the new Dodge muscle cars) are all high-profit models that should give FCA's margin an additional boost as long as the U.S. economy stays strong -- and as long as U.S. buyers continue to crave those Jeep SUVs.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
