Jeep to expand production to meet demand

Fiat Chrysler boosts Jeep production plans
Fiat Chrysler boosts Jeep production plans   

Jeep, perhaps the hottest brand in the auto industry, has a strategy in place to become even hotter.

As it works to better meet customer demand, Fiat Chrysler on Wednesday said that it will build more of its popular Jeep and RAM pickups at its North America plants, by converting some of the space currently dedicated to Dodge and Chrysler cars.

It's all part of the automaker's goal to increase Jeep global sales to 2 million a year by 2018. That target is 100,000 vehicles greater than Fiat Chrysler's previous guidance, as cheap gas continues to fuel demand for SUVs.

"There has been a permanent shift towards UVs [utility vehicles] and pickup trucks, and we have seen it in terms of our ability to meet market demand," Fiat Chrysler CEO Sergio Marchionne said.

Fiat Chrysler's management contends that low gas prices are a permanent condition in the North American market. Right now, the average price for a gallon of gas is $1.82, down from $2.03 a year ago, according to AAA.

Though others would argue it's impossible to predict gas prices over the long term, it's not surprising that Marchionne and his team are pushing to sell more Jeep vehicles, as they've become the automaker's primary profit driver. Excluding Ferrari, which was spun off in an IPO late last year, FCA made $410 million in 2015, much of which was due to the success of Jeep.

In the U.S., Jeep sales last year jumped 24 percent to a record 865,028. That helped push the brand's global sales to 1.2 million vehicles. Since Fiat bought Chrysler in 2009, Jeep's global sales have skyrocketed more than 334 percent. And the automaker can't keep up with demand.

"We are running effectively, nearly seven days a week with almost no shutdown of the Wrangler plant to try and satisfy demand," Marchionne said. "We have nearly a similar arrangement at the Warren truck plant so that is unsustainable."

Susy Menostao (left) and Marquez Giovanny check out a Jeep Grand Cherokee for sale at the Hollywood Chrysler Jeep dealership on Dec. 1, 2015, in Hollywood, Florida.
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Susy Menostao (left) and Marquez Giovanny check out a Jeep Grand Cherokee for sale at the Hollywood Chrysler Jeep dealership on Dec. 1, 2015, in Hollywood, Florida.

While Jeep's growth, especially overseas, has received the most attention in the resurgence of Chrysler brands under Fiat ownership, sales of RAM pickups have also steadily increased. Last year, U.S. sales of RAM climbed 4.5 percent to just under 500,000 trucks. That's a dramatic improvement from 2009, when RAM sales totaled just 177,000.

In a sign of how much demand there is for SUVs and pickups, Fiat Chrysler plans to sell a Jeep Wrangler pickup starting in late 2017 or early 2018. At the Detroit Auto Show, Marchionne talked about the Jeep brand expanding to include a pickup.

"Jeep is the classic example of a brand that is capable of doing a lot more than it is doing today, but it needs product, it needs extension," he said.

As for the less profitable passenger cars Fiat Chrysler currently builds in the U.S., Marchionne said the Dodge Dart and Chrysler 200 will "run their course." The automaker hopes to partner with another manufacturer to continue production of those models at non-FCA plants.

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