FCA delays launch of redesigned Jeep Grand Cherokee to 2018-2019

Article by Andrew Christian, on July 2, 2015

There will be a delay of at least one year for the launch of a redesigned Grand Cherokee sport utility vehicle, according to Fiat Chrysler Automobiles NV's Jeep brand chief Mike Manley. This brings to light one more obstacle faced by Chief Executive Sergio Marchionne as he finds a partner for the company. Manley confirmed that FCA has decided to push back the launch from late 2017 to late 2018 or even to 2019.

Reuters has reported that more than a dozen existing or new vehicles that were set to be released in North America have been delayed. A report from the Bank of America stated that FCA’s delays are not due to a lack of money. But the downside is that dealers will have to wait longer for new vehicles while rivals are launching new models more quickly.

The report also stated that it is “unlikely” for FCA to meet its anticipated market share gains. According to analysts and industry executives, potential FCA merger partners will be looking at how the company is able to cope with the auto industry’s race for technology. Marchionne has invited General Motors CEO Mary Barra to discuss a merger.

However, Barra was quick to deny his offer, saying that GM will do better by “merging” internally to boost economies of scale, cope with more stringent fuel economy standards, and meet the demand from consumers for digital connectivity and more sophisticated safety features.

From non-public data gathered by J.D. Power and reviewed by Reuters, we learned that what FCA will bring to a merger is a U.S. model lineup that is the least fuel-efficient among major auto brands, poor qualify performance, and a higher than average dependence on consumers who depend on subprime loans.

About 26% of Chrysler sales used subprime financing, much higher than the 12.7% industry average. FCA's Jeep and Ram brands both fall below this level. Last year, about 1.5% was spent by FCA on research and development. Meanwhile, Ford spent 4.8% and GM used up 4.7%. These figures come from non-public data revealed to Reuters by a source.

Last year, the profit margins reported by FCA in North America were 4%, about half of what GM and Ford reported. FCA said that it aims to increase its North American margins to 5.5% to 6% fro 2015, still below the estimates of its rivals. The automaker also falls way behind in the race to reach the U.S. fuel economy goal of 54.5 miles per gallon by 2025.

Last year, FCA's U.S. fleet reported an average of 21.1 miles per gallon, coming in last place among major automakers and almost 8 miles per gallon behind top brand Mazda Motor Corp.

FCA's chief spokesman in North America Gualberto Raineri responds to criticism, saying that Fiat has been confounding skeptics ever since Fiat took over Chrysler in 2009.

Marchionne has been saying that global automakers have to consolidate to afford the high investment costs for technology. While he says that FCA is making “huge progress,” it has been costing the company.

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