FCA NV Q2 2019 Press Release

[Rustydodge]

I would have rather seem them slightly decrease Ram incentive spending (like they did Q1) but the % increase in incentive spend was about the same as the % increase in ATP so I'm not too concerned.
FCA: Ram Pickups Likely Buoy Q2 Financials - Cox Automotive Inc.

 

[TripleT]

Rebates are a marketing tool anymore... Just raise the invoice pricing and keep the incentives so people think they are getting a deal.

 

[Rustydodge]

High advertised rebates are yes - just get people in the door.

Average incentive spending and ATP across a brand is more important to watch - which is why i'm not concerned because they both increase the same. If ATP had dropped or stayed constant with new HDs coming online in Q2 I'd be worried we are buying marking share with Ram classics.

 

[AlexB]

My guess, FCA is serious thinking long & hard about another RAM plant. Either dedicate all the Mexican capacity to RAM, or overhaul Belvidere for pickups (Cherokee goes to either Windsor or Toluca) .

 

[Bili]

My guess, FCA is serious thinking long & hard about another RAM plant. Either dedicate all the Mexican capacity to RAM, or overhaul Belvidere for pickups (Cherokee goes to either Windsor or Toluca) .

It doesn't make sense. It's too risky. It's better to rise up ATP.

I'm not sure if SHAP is running at full capacity. Maybe @redriderbob can enlighten us. Full capacity as factory which runs 24/7.

 

[Rustydodge]

CNBC's take on Mike Manley | General Mopar Discussion

From this thread, Warren is 575k and outdated, SHAP is 700k and brand new. Those numbers have to be max (3 shifts).

Complete guess that SHAP is running 1 shift close to max capacity if current sales are 1/3rd 5th gen, 1/3rd classic, 1/3rd HD.

When Warren is updated they should be able to run as much as SHAP (but may have durango/wagoneer/GW to feed)

Which leaves Saltillo as the question.

700k is more than what F150 sells each year.

 

[AlexB]

CNBC's take on Mike Manley | General Mopar Discussion

From this thread, Warren is 575k and outdated, SHAP is 700k and brand new. Those numbers have to be max (3 shifts).

Complete guess that SHAP is running 1 shift close to max capacity if current sales are 1/3rd 5th gen, 1/3rd classic, 1/3rd HD.

When Warren is updated they should be able to run as much as SHAP (but may have durango/wagoneer/GW to feed)

Which leaves Saltillo as the question.

700k is more than what F150 sells each year.

Warren as 575 is way too highly base on the Bankruptcy docs. 250K is about right.

 

[Bili]

Warren as 575 is way too highly base on the Bankruptcy docs. 250K is about right.

Question is... Are we looking at capacity based on 2 crews for total of a 10 8-hour shifts per week or 24/7 which would result in a 21 8-hour shifts per week.

If 250k is for 10 8-hour shifts than number for 24/7 is 525k.

 

[Rustydodge]

Warren as 575 is way too highly base on the Bankruptcy docs. 250K is about right.

Annual sales of 500k in the recent past would have required saltillo to run 250 if warren can only run 250 which would be a 50/50 split roughly HD vs LD which we know isn't true. I'm sure Warren may have been running around 250k back in 2009.

 

[AlexB]

Question is... Are we looking at capacity based on 2 crews for total of a 10 8-hour shifts per week or 24/7 which would result in a 21 8-hour shifts per week.

If 250k is for 10 8-hour shifts than number for 24/7 is 525k.

Great point, some of the Bankruptcy estimates to win court approval was to give financial room for a 15 milllion SAAR.
But for the Wagoneer family, wasn't it planned for one crew?

 

[AlexB]

About Grand Cherokee, FCA told local Michigan officials about overhauling Belvidere if Detroit didn't approve the Mack project,

The automaker considered underutilized plants in Belvidere, Illinois,

Mack Engine expansion gets $93M more in incentives

The brownfield tax captures are in addition to the $223.5 million in incentives approved in May

www.detroitnews.com

So as the UAW and FCA are in contract talks, maybe moving Cherokee out is on FCA's mind.
We should have idea by October.

 

[Jared B]

"Under inventoried of RAM" - that's saying something, considering June was a 68k pickup month. Would be nice to know what specific ram he is talking about (commercial HD vs vans vs light duty). That combined with the comment on updating the classic is wild.

I'd assumed classic would be ended in 2020. Maybe not?

According to our sources, the Ram Classic will run until ~2022 and will be getting an update, but likely just a safety-related update to stay compliant for the rest of its life span.

 

[Bili]

Fiat Chrysler Automobiles N.V. (FCAU) CEO Michael Manley on Q2 2019 Results - Earnings Call Transcript

Michael Manley

Actually just before – thanks [indiscernible]. I just want to say before we open up to Q&A, I just want to quickly talk about compliance in terms of CO2 emissions standards in Europe because, obviously, last quarter, on the Q&A, we discussed that strategy to reach compliance with European emission standards through a combination of continued deployment of more fuel-efficient traditional technologies. And then I talked a little bit about the progressive rollout of electrified vehicles and, obviously, the use of pooling arrangements within EU. And I just want to add a little bit clarity before we go to the Q&A session.

So, in 2019, we'll, obviously, continue to roll out additional technology improvements, but we'll have fuel efficiency of our vehicles, and that does include our new combustion engines. So, the latest GSE engines are now being rolled out progressively across Europe, which will give us a significant help.

And these actions, combined with the credit pooling agreement with Tesla that I discussed before, will mean that FCA will not pay fines this year.

Now, in 2020, we are going to launch the Fiat 500 BEV that I mentioned earlier, along with the Jeep Compass Renegade and Wrangler plug-in hybrids, which I think will probably get to the sales mix somewhere in the order of around 5%.

And these vehicles along with the increased use of mild hybrids, combined with our Tesla credit pooling agreement, means that we're forecasting to be compliant in 2020 with a combination of those things.

Now, in 2021, we'll add another battery electric vehicle to our fleet, another plug-in hybrid and four more mild hybrid applications. And that will be as we transition to meeting emissions standards in 2022 with our own products, rather than in combination with carbon credits.


So, what we're looking at is really a transition from where we sit today, progressive transition, I think, with the right investments in our electrified vehicle fleet to back end of 2021, 2022 where we will through our own products, as I just mentioned, be completely compliant.

Rod Lache

Great, thank you. And just switching to North America, two questions. One is, did the new Ram heavy-duty production ramp kind of come in as you had been expecting it to in terms of the trajectory of that launch?

And, secondly, looking at the light duty, you said that the DS Ram Classic will run for as long as it makes business sense and it seems to be doing quite well. Can you just talk about, longer term, how you're thinking about product planning for Warren? Eventually, I presume you're expecting something is going to replace that line. How should we be thinking about the timing of that and how you're thinking about what could replace that contribution margin?

Michael Manley

So, with regard to the ramp-up of heavy-duty, yes, very much on track. And same with Gladiator. In fact, ahead of where we thought they would be. So, I'm very pleased with the team and thank them for the work they did getting ready for that. Obviously, we learned a lot with the light duty ramp-up and we're determined not to repeat it.


In terms of the Classic, the intention is, as you said, as long as it makes business sense for us to continue to run it. In Warren, we're facilitated – that line is being facilitated to be able to run a production line for light duty into the future because if I look at overall volume demand that we have today and the three sources that we had, even though it's true the combined volume of those three sources is slightly in excess of what I would call today's forward-looking demand, we seem to the growing at a relatively good pace. So, I think keeping flexibility going forward is important, which means that if we make changes to the Classic, it may well stay as a classic, but updated classic, if you know what I mean. Because the dynamic between that on our entry level and then DT, as we call it, on our mid and high level, seems to be working well in our showroom now. So, that's kind of how we're thinking about it.

Stephen Reitman

Yes. Good afternoon, everybody. Looking at the margins, obviously, North America, about 102% of the overall results. So, it's really all about North America with the optionality, I guess, in the other operations. How much do you think you can recover – or how much you're going to be delivering – sounds like you had mentioned that the cost savings will be more constrained in the second half of the year in the other regions. So, [indiscernible]?

And looking at the margins in North America, we see a very strong acceleration between Q1 and Q2. I think the guidance is very much that we'd see that much more in the second half of the year. So, we've seen 10% margins in the third quarter of last year. Do you think that's a consistent run rate we might see in Q3 and Q4? Thank you.

Richard Palmer

Hello, Stephen. Yes. So, as we look at the progression into second half of the year, I think, as you mentioned, the margin performance in Q2 in NAFTA is very supportive of our second half guidance. We expect to progress up to 10% margin in both Q3 and Q4 in NAFTA.

The drivers are the things we have been talking about. So, we will have more heavy-duty trucks in the second half, more Gladiators in the second half, actually more light duty as well. We would also have probably a better retail fleet mix, seasonality wise, improvement in pricing from the model year launch in Q3.

So, all of those things, together with continued focus on industrial costs, while it's true that we had launch issues through the beginning of – in the middle of last year, but we also had a lot of launch costs while continued issues in the plants also through the end of last year. So, I think we'll see industrial costs continue to be positive also in NAFTA through Q4. So, all of those elements are focused for us to get to 10-plus-percent margin in the second half for North America.

I think, for Latin America, we also expect to continue to see improvements. I think our business in Brazil has been performing very well. We are not counting on an improvement in Argentina, but I think the Jeep brand, the Pernambuco installation, the Fiat Toro as well, the team down there is doing a very good job. We have opportunities, I think, to continue to improve margin in Latin America, also outside of Brazil.

Maserati, in this first half, is taking a few impacts, not least of which the residual value impact we had this quarter, which we don't expect to repeat in the second half. It's also true that Maserati will continue to have some level, I think, of stock reduction in the second half. But I think we'll see some level of improvement first half to second half.

And, EMEA, obviously, the issue on EMEA is also seasonality because, as you know, Q3 has low seasonality in terms of volumes. We expect, though, Q4 to start to show some level of improvement in terms of margins. So, all of those things will contribute to seeing a second-half margin for the group which should exceed around 7% to get to our guidance.

Martino de Ambroggi

Thank you. Good afternoon, everybody. I have a follow-up on the previous question. So, it requires just a qualitative answer. But do you perceive any change in the attitude of the sector after your very detailed proposal for the merger deal with Renault? I'm not asking you is someone else is proposing itself. But do you perceive the doors are more open, more closer, locked compared to the recent past? Because this move would radically – well, not radically, but significantly change the competitive landscape. So, maybe – so, it's putting a bit of pressure on other players.


Michael Manley

Yes. Hi, this is Mike. I think my assessment of the situation is – and it is just recently, many people have let us know that in Europe, in particular, partnerships, corporations and even mergers are going to be necessary going forward to maintain some people's profitability in the marketplace, particularly if you're very, very heavily exposed to the European market. And you've seen a number of companies announce different corporations or announce that they're open to corporations or partnerships or platform sharing.

So, I think, in general, partly because the concept of global volume has probably been replaced now with a bigger focus on regional volume because the regions are obviously developing very, very differently. Means, a number of people are open to looking at those things, if you like. It's more common.

Martino de Ambroggi

Okay. And if I may have a more specific question because, if I look at the public statements coming from Renault, it seems they're still interested in restart negotiations with you. And I should pose my personal feeling, this is also the case for you in certain circumstances. But what are the minimum conditions required for you in order to potentially restart a negotiation with Renault?

Michael Manley

Martino, this is Mike. I'm not surprised people are interested on both sides. The synergies were very compelling, weren't they, in the industrial logic. I think it's still the right industrial logic for today. If you don't mind, what I don't particularly want to do is get into negotiation in terms of what conditions may or may not be the right conditions on this course. So, I'm going to be as polite as I can, but refrain from answering that question, apart from saying I have no doubt why they'd still be interested in it.

George Galliers

Okay, thank you. And then, Mike, another area I know you're very focused on is improving the sales channel mix in Europe. Could you perhaps talk to kind of what level of opportunity do you see that as? Is it sort of tens of millions of euros or more than that? And when should we expect to see it start to flow through? And will it be in the sort of volume and mix buckets or net pricing or a combination of the two?

Michael Manley

Let me just talk, if I can, George, in general a little bit more about EMEA. And I'll expand on some of the things that I told you about before. At this moment in time, we can't really see an income statement because, as Richard detailed there, quite a lot of moving pieces in their income statement. But they have done, I think, some very good and significant work on the cost side of their business and in terms of their efficiency. So, if I look at that ratio, for example, of people, vehicle sales, I think that's been a huge focus in that area.


EMEA, historically, partly because of the segments that they're in, have used a lot of lower margin channels. Making the move from those into higher margin channels is something that is taking a little bit longer than I had expected at the beginning of the year. And I think we'll benefit from some of the new products that they'll receive in the next two years because, obviously, today we sit with relatively old showing in EMEA.

So, I think the upside opportunity is very significant. And I believe that we have opportunity within our portfolio to make that move. And that move, by the way, is not just channel, it's also country where we need to become less reliant on Italy and improve our sales in, obviously, some of the other major markets within EMEA. And we'll be helped significantly as we get into new model launches in the coming 12 and 18 months for the marketplace. But if you look at some of our competitors, we've had a much better cadence of model launches in segments that are outside of the A segment – and that, by the way, is our strategy – you will see that they've had fairly significant success. And it isn't just about new vehicles and driving up their average transaction price. It is obviously controlling the variable costs. So, it's always that balance between driving down our variable costs and making sure our brands are positioned correctly. So, our strategy is not complicated. I think the teams are very clear on what they need to deliver, but they will get significant help once we start renewing that fleet for them.

George Galliers

Great. And if I can just sneak in a final one on Maserati which seems to be the flavor of the call. There was a quote from Harald Wester in one of the auto magazines where he said, you don't want to go down, you want to go up, referring to vehicle size. And I think some journalists may have interpreted that as Maserati backing away from the midsize UV which was presented in last year's Capital Markets Day. Could you just clarify that the midsize UV does remain part of the product plan at Maserati?

Michael Manley

Not only does it remain part of the product line for Maserati, it's very important then that product is under development as we speak.

 

[Mopar392]

I just wish they would at least mention their plans for Dodge.