Marchionne's preference: Run 2 factories 'flat-out'

Chrysler considers third pickup plant

Marchionne's preference: Run 2 factories 'flat-out'

Sergio Marchionne once vowed not to build another assembly plant in North America.
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DETROIT -- Strong demand for Ram pickups has Chrysler Group executives looking at breaking their vows and building an auto plant in North America.

During a conference call last week to discuss the company's $1.6 billion fourth-quarter profit, CEO Sergio Marchionne said he and other Fiat Chrysler executives were debating whether to build a third pickup plant to meet demand for Ram light- and heavy-duty pickups.

Marchionne, who vowed during the recession never to build another assembly plant in North America, says his preference is to run existing pickup plants in Warren, Mich., and Saltillo, Mexico, "flat-out."

He said he believes Chrysler could increase pickup production by 15 or 20 percent without requiring an additional plant. He placed the odds of building a new plant "under 50 percent."

Sales of Ram pickups, which were re-engineered for the 2013 model year and are Chrysler's best-selling vehicles, were up 21 percent in 2013 to 355,673. By comparison, sales of all full-sized pickups in the United States rose 17 percent last year.

Chrysler profits
 4th qtr. '13Full year
Revenue$21.2 billion$72.1 billion
Net income$1.6 billion*$2.8 billion*
   
*Includes $962 million one-time tax gain
Source: Chrysler Group

The pickup debate was revealed on the day that the board of directors of Chrysler's corporate owner, Fiat S.p.A., voted to rename itself Fiat Chrysler Automobiles NV. The company, which unveiled a new corporate logo, said it would retain its existing four global operating regions.

Other management structures also would remain unchanged, including the 20-member global Group Executive Council, which has members from Fiat and Chrysler.

If approved by Fiat shareholders, the new company will be incorporated in the Netherlands, domiciled in the United Kingdom for tax purposes, and listed primarily on the New York Stock Exchange and secondarily in Milan. The structure mirrors the one set up for CNH Industrial, Fiat's truck and tractor affiliate, when it was reorganized last year. The day and location of the shareholders meeting has not been announced.

For 2013, Chrysler reported net income of $2.8 billion on revenues of $72.1 billion, both up sharply from the previous year.

As a result, Chrysler's 37,200 unionized hourly employees in the United States will receive profit sharing checks of $2,500.

During a two-hour call with analysts, Marchionne said Fiat would build and sell a version of the 2014 Jeep Cherokee in China, but not the same vehicle that is for sale in the United States.

Marchionne said Chrysler's 79-day vehicle supply as of Jan. 1 was a byproduct of the delayed launch of the Cherokee and the buildup of 2014 Chrysler 200 and Dodge Avenger sedans.

Chrysler's plant in Sterling Heights, Mich., will stop building the Avenger and the current 200 this quarter and begin assembling the 2015 Chrysler 200.

You can reach Larry P. Vellequette at lvellequette@crain.com.


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