Fiat Chrysler Automobiles (FCA) will stop building small cars in the United States and will pour its efforts into delivering an increased number of trucks and sport-utility vehicles to the market.
The news comes from Sergio Marchionne, CEO at FCA, who recently announced that the last passenger cars should exit assembly lines in the U.S. at the end of Q1 2017.
Facilities that are now building models such as the Dodge Dart or the Chrysler 200 will switch to delivering SUVs and trucks, with the end goal to have the full Fiat Chrysler factory footprint dedicated to rolling out Ram trucks and Jeep SUVs.
Marchionne broke the news during his company's Q2 earnings call.
Fiat recently made public that it plans to invest $1.5 billion in its assembly plant in Sterling Heights, Michigan. The facility is located in the suburbs of Detroit and is currently fitted for the midsize sedan, Chrysler 200 C. The Sterling Heights factory was subject to a massive layoff of about 1,300 workers as a result of the declining demand for small size cars. Once the Sterling Heights factory is upgraded, it should start building Ram pickup trucks.
Fiat Chrysler is already building Rams in a factory located in Warren, Michigan, which insiders familiar with the matter speculate will be retrofitted to start rolling out Jeep SUVs. The production of Jeep Cherokee vehicles should be relocated to Belvidere, Illinois, the current home of the Dodge Dart and small Jeep SUVs.
Fiat Chrysler is in pursuit of a suitable manufacturing teammate but Marchionne notes that no announcement is appropriate at the moment, as his company is in talks with multiple potential partners.
The change of focus from automobiles to larger vehicles is part of Fiat Chrysler's strategy to boost the company's North American profit margins. Trucks and SUVs have traditionally been preferred by customers in the U.S., and they also sport higher added value than smaller cars.
"By the time we're finished with this, [...] all those U.S. plants will be producing either Jeeps or Rams," Marchionne says.
Marchionne also pointed out that the company's remaining car models production will be relegated to Canada or Mexico.
During the first six months of 2016, SUVs and trucks sales surged by 9 percent, while automobile sales plummeted almost 8 percent. Looking at new car sales in the U.S. for 2016, 58 percent were trucks and SUVs. Fiat Chrysler said that it registered a 2 percent decline in North American sales volume during Q2 2016, as the demand for compact and midsize sedans dwindled.
