By Larry P. Vellequette, Crain News Service
DETROIT (Jan. 13, 2015) — Fiat Chrysler Automobiles (FCA) CEO Sergio Marchionne said Jan. 12 that incentive spending in the U.S. is not excessive and that the industry may have over-reacted on recalls.
In his annual wide-ranging press conference at the Detroit auto show, Mr. Marchionne also said the company is “going to take a very hard look” at whether it needs to move the Wrangler away from its historic home in Toledo, Ohio, because the workforce there built more than half of the record one million Jeeps the company sold worldwide in 2014.
“It's something that cannot be ignored,” Mr. Marchionne said, calling both the Jeep sales record and the record production in Toledo “huge accomplishments” for the auto maker and its employees.
“We owe them something,” Mr. Marchionne said.
He confirmed that he planned to meet soon with Ohio Gov. John Kasich and Toledo Mayor D. Michael Collins about the future of Wrangler production in Toledo, but said the issue remains one of money.
“The problem is the size of the investment, and I need to find a way to make that nut go away. People need to step up to the bar and plug that gap,” the 62-year-old Mr. Marchionne, said.
Asked whether incentive spending had gotten out of control, the FCA US chief executive said he believed the industry as a whole is healthy and won't sacrifice profits to chase market share as it did right before the Chrysler Group L.L.C. and General Motors Co. bankruptcies.
“We watch the level of incentivization like a hawk,” Mr. Marchionne said. “There are two signs that are indicative of the state of health of the industry: incentives and inventory levels. We're miles away from 2009.”
Mr. Marchionne was asked several times about whether his company had recalled vehicles that didn't need to be recalled to keep out of headlights of the National Highway Traffic Safety Administration (NHTSA). Late last year, FCA expanded its recall of some vehicles built with Takata Corp. airbags to a nationwide campaign, even as it claimed that its own testing and reported incidents only found issues in areas of high, sustained relative humidity.
“In some instances, we may have overreacted to a particular problem,” Mr. Marchionne said, speaking of the industry as a whole. “In a lot of ways, the all-encompassing issue to the airbag issue may have been overkill.”
He said the industry and NHTSA will find an equilibrium over the next 12 to 18 months, adding that, ultimately, the costs for recall campaigns will be passed on to consumers.
“Once the paradigm is established and set, they'll become endemic to the structure and they'll get passed along,” Mr. Marchionne said of recall costs.
In other comments, Mr. Marchionne said:
• Auto makers must find a way to share development costs of common components, such as engine blocks. He said it made no sense for auto makers to each spend billions developing what are very similar I-4 engines blocks, for example, when those costs could be shared. “I sincerely hope we move this issue quickly. Long term, this is something the industry needs to embrace. Without bias, without CEO egos getting in the way.”
• FCA will spend over $2 billion combined upgrading its Windsor Assembly plant and developing the next-generation Chrysler Town & Country minivan. The minivan will be shown at the Detroit auto show a year from now, Mr. Marchionne said.
• Alfa Romeo's pricing structure will largely mimic that of BMW as the premium Italian brand expands its U.S. portfolio beyond the 4C and 4C Spider.
• Teething problems with the nine-speed automatic transmission for the company's lineup of front-wheel-drive vehicles have required “an inordinate amount of intervention” that “increased in intensity in 2014.” He said the issues Chrysler is having with the transmission are not mechanical, but software related that hurt the vehicles' refinement. “It is annoying, but we need to get rid of [the refinement issues], and I don't like it,” he said.
• The trading value of the dollar is making manufacturing in the U.S. very attractive to global auto makers. “Everybody outside the U.S. is going to start looking at this market in a much more affectionate way than they've done in the past.”
• FCA is not in merger chats with other global auto makers, but is taking with others about how to collaborate more.
• He continues to believe the two-tier wage scales for United Autoworkers (UAW)-represented hourly workers is unfair, though they help auto makers' bottom lines. He said he won't negotiate his upcoming labor contract with the UAW in the press, however.
• Overall, the automotive industry is doing well. “There's not a single doubt that the industry is viewing 2015 in a very optimistic fashion. In the worst possible scenario, it's a stable environment. I think we all feel comfortable that we're not carrying out a kamikaze business practice. This is a good auto show,” he said. “We're all in good shape. We're not complaining, which is unusual.”
This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.