If there’s ever been a consistent shining light in the Chrysler brand portfolio in modern years, it’s been Jeep. Recognized and admired worldwide, is one of the strongest brands in any industry. But for Fiat Chrysler to give up its star player to a Chinese automaker, as has been suggested by recent reports, would be a supremely boneheaded move.
All of this feels familiar. In 1986, Renault was looking to pull out of the U.S. market by selling American Motors Corporation to Chrysler. But, as Jason Vines and Joe Cappy write in their book The Last American CEO, there was a major sticking point in the negotiations, namely that Chrysler only wanted Jeep, and Renault wasn’t willing to part out AMC:
In reality, Chrysler really was only interested in buying the Jeep brand, product line, manufacturing facilities, and engineering team — masters in the art of four-wheel drive. But it was obvious fairly early in discussions between the parties that the “just Jeep” position was a non-starter for Renault. To get Jeep, the French made clear, all of AMC was going to have to be part of the deal.
In much the same way as Renault didn’t want to be left in the U.S. with a bunch of subpar brands with quality issues, Fiat Chrysler—particularly its American operations, FCA U.S. LLC—would find itself in a hell of a rut without Jeep.
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In 2016, Jeep accounted for over 1 million of Fiat Chrysler’s approximately 2.5 million sales in the U.S. and Canada, according to Good Car Bad Car—that’s about 40 percent. And if you consider that more than 200,000 of those Jeep sales came from a simple, body-on-frame, solid-axle Jeep Wrangler whose profit margins are almost certainly through the roof (through the soft top?) because the platform and tooling are so old, you begin to understand how important Jeep is to FCA as a whole.
For Fiat Chrysler to drop its gem would be to trade long-term opportunity for short-term cash. And while the company’s U.S. operations would still have the strong and profitable Ram brand, it would also be saddled with struggling Alfa Romeo, Fiat and Chrysler brands. And it would have the Dodge brand which, right now, is mostly made up of cars built on an L-Car platform from 2005, and also a seven-passenger SUV built in a Jeep plant.
FCA would be left in the U.S. with, essentially: a bunch of pickup trucks at Ram, some pretty sports cars that have a tendency to break down at Alfa Romeo, an excellent minivan as part of a disappointing Not Really Luxury brand at Chrysler, a bunch of small, often crappy Fiats that nobody wants to buy, the aforementioned large cars on the old Daimler platform at Dodge, and maybe the Durango (and I’m not sure how that’d work if its Jefferson North Assembly Plant went to the Chinese company).
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That’s just not a comprehensive enough lineup, and on top of that, the brands aren’t well defined compared to GM, Volkswagen, Ford or pretty much every other major automaker, who all have clear brand hierarchies. And while there’s a chance that, with all the money from the sale, Fiat Chrysler U.S. LLC could make strategic investments to bolster the Ram and Dodge brands, and revive the ailing Chrysler brand, it seems like a hell of an uphill battle without perhaps their strongest warrior.
Which is why possibly none of this matters, because I strongly doubt Fiat Chrysler will actually sell off Jeep by itself. For years now, FCA has been seeking a merger partner or a new parent company; someone to alleviate the debt and bring down cost overruns and to help with future-facing initiatives like autonomous vehicles and electrification.
Selling Jeep, and only Jeep, would not fix any of those problems. It’d mean they’d lose their best and most valuable brand for some extra dough. It’s like selling a kidney because you’re short on this month’s rent. It’s a bad move.
Then again, if Sergio Marchionne is as desperate as he seems, who knows.
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