Just about two weeks ago, FCA CEO Sergio Marchionne surprised the industry by making a statement. He said that the next Jeep Wrangler might be built on a unibody platform with a relatively smaller yet turbo-charged engine and an aluminum body. Marchionne believes it’s going to cost a lot more to build a Wrangler with aluminum framing in Toledo, so there are chances of moving Wrangler production out of its historic home.
People’s first reaction to this statement was quite obvious – the company is already carrying a huge debt load, so it seems it’s no longer possible for them to build new models in this unit. This however may not be the full truth. In reality, the company may have to move Wrangler out of its birthplace because they just don’t want to shut the plant down to make the switch to aluminum.
When Ford went for the F-150 at is Rouge assembly complex, they had a backup plan and made Kansas City to pick up the slack. It’s obvious that Fiat Chrysler Automobiles doesn’t have this luxury. They will be better off moving the production of new model out of Toledo than shutting it down to make it suitable for aluminum framing.
To get a clearer picture, you have to consider the numbers. After selling 134,068 Wranglers through September, dealers in the U.S. had 31,543 units unsold, which actually translates into a 54-day supply. It’s obvious that if with a single plant working six days a week the company cannot keep up with U.S. demand, they certainly have some decisions to make. In fact, Mike Manley, Jeep brand head, once stated that the company is seriously thinking of limiting Wrangler shipments to other countries to cope with U.S. demand.
It also suggests that Toledo unit is already functioning on its full capacity, with no real back up from other units. The company thinks of taking the production outside of Toledo to meet the ever-increasing demand of this hugely profitable vehicle without putting a break to the working of Toledo unit. With about 19,500 Wranglers per month, the company may get a profit of up to $100 million a month. They will be losing $200 million if changeover to an aluminum assembly process takes a couple of months. So, what do you think are the options left for FCA?