Fiat Chrysler has made another big announcement: it will sink $1.5 billion into a suburban Detroit factory as it retools plants to make more trucks and SUVs and stops producing small and midsize cars.
A few weeks back, the automaker announced a billion-dollar investment in re-tooling facilities in Illinois and Ohio to accommodate Jeep production.
Several cars have been “orphaned” by the re-tooling and Fiat Chrysler said at the beginning of the year that it would outsource its small and mid-sized sedan production as it re-vamped, but Automotive News is speculating that this could actually a death knell for cars like the Dodge Dart and Chrysler 200 – and here’s why: the auto industry is just too strong right now.
Dave Sullivan, an analyst with AutoPacific, said lack of manufacturing capacity is constraining all automakers and there's "no room at the inn" for the Dart and 200.
What’s interesting about Fiat Chrysler’s strategy is that it seems to be in response to consumer demand, but might not make the gov’t too happy in the long term.
The EPA, CARB and the Board of Transportation released a study that determined that low gas prices might impact the ability of automakers to hit the fuel efficiency standards that have been outlined by the government. The goal is to hit these averages by 2025, but automotive company compliance is calculated by the average gas mileage of the cars they sell. Low gas prices have contributed to an uptick in SUV and crossover sales. As an example: AutoData Corp. says that Prius sales are down 25 percent so far this year, while sales of SUVs and other light trucks are up 9 percent.
So how does Fiat Chrysler reconcile this strategy long term? Do the profits outweigh any potential penalties? Do they figure the government requirements will get delayed and they’ll have more time down the road? Maybe there is some amazing fuel efficiency technology that’s up Sergio Marchionne’s sleeve? I guess we watch and wait, my friends.