Fiat Chrysler studies making Suburban/Expedition fighter under Ram

Fiat Chrysler Automobiles is studying whether to build a large Ram SUV to compete with the Chevrolet Suburban and Ford Expedition.

CEO Sergio Marchionne, speaking during a conference call today to discuss the company’s third-quarter financial results, said a potential large SUV was possible because of the planned redesigns of Ram’s pickups.

The large SUV segment is “the near-exclusive use of some others. We have a reasonable chance of getting at least part of that market,” Marchionne said.

A large SUV would be a first for Ram since it was calved from Dodge in 2009. Ram was separated in part to distinguish its pickups and commercial vehicles from passenger-centric Dodge vehicles and to establish brand identity.

Marchionne said that as Ram redesigns its light- and heavy-duty pickups and is able to add production, it has room for such a vehicle.

“I think we have a unique opportunity with renewal of the pickup line, with the powertrains we selected, to significantly increase output,” he said. “We will also be exploring, as a result of that investment, some other segments.”

A Ram SUV wouldn’t compete with a planned three-row Jeep Grand Wagoneer, Marchionne said. The Grand Wagoneer -- whose development has been delayed until 2019 -- would be a luxury vehicle that competes with offerings from Range Rover, Marchionne said.

“I don’t think anybody who buys a large SUV is confusing it with a Range Rover,” he said.

Marchionne said he planned to provide an update to FCA’s product plan, unveiled in May 2014, early next year.

Marchionne said that he believes that fuel prices will remain low for the foreseeable future, and that small cars were becoming commodity vehicles while the real profits remained in trucks and SUVs.

Marchionne said the Ram SUV study was, in part, a result of comparing FCA’s North American single-digit profit margin with the double-digit margins of rivals Ford and General Motors. He said if FCA’s product mix were more similar to those of Ford and GM, FCA’s profit margin also would be in double digits.

GM’s stable of large SUVs are among its most profitable vehicles on a per-unit basis.

As a segment, sales of large SUVs are down 1.9 percent through the first nine months of 2015, but still represent almost 390,000 units in volume, according to the Automotive News Data Center.

Also discussed by Marchionne and CFO Richard Palmer during the call:

• UAW: Palmer said the four-year labor contract FCA signed with the UAW will add $421 million to its manufacturing costs in 2016, and an additional $33 million in costs for the fourth quarter. Marchionne said: “To the extent that we’re increasing labor costs, it does have implications on our profitability.” He called the contract “livable,” and said some of the added costs will be returned from achieving greater efficiency.
• Alfa Romeo: Marchionne said the continued weakness of imported luxury vehicles in China -- including FCA’s Maserati brand -- had forced a reassessment of FCA’s Alfa Romeo strategy. He said the automaker would still spend the same amount on developing Alfa Romeo and stood by a 2018 sales projection of 400,000 units globally. But he said that a large portion of the volume projection that had been assigned to China would have to be absorbed by other regions, including North America and Europe. He also said that all of the planned Alfa Romeo vehicles would still be developed, but they may come in a different order to satisfy consumer tastes in Europe and North America.
• Jeep: Marchionne said Jeep’s global development was going better than expected. He said that the 2014 projection for the brand of 1.9 million units by 2018 “is probably understated.”
• Electrification: Marchionne reiterated that FCA, a latecomer to hybridization, will start to catch up with other automakers as it launches its first plug-in hybrid next year with the 2017 Chrysler Town & Country minivan. “I think most of the fleet will go to hybrid,” by 2023, Marchionne said, because of ever-tightening fuel economy standards. He said the costs are significant, and “it’s an issue of being paid for all of this technology that’s going in.”
• VW’s diesel scandal: Marchionne said he still believes in diesel, despite the VW scandal. FCA has a broad array of diesel offerings, especially in Europe. “The origin of this problem was a governance failure; it is not a failure of technology. It was the potential malfeasance of an agent in the market,” Marchionne said. “I have not taken the view that diesel is dead. I don’t think it is.” He said VW will survive. “Failures like this could happen to anybody. I continue to believe VW will come out of this stronger, and ultimately will come back as a stronger competitor in the marketplace.”
• Consolidation: Marchionne said that industry consolidation, which he championed this year, has not gone away, and may have become clearer to others in the wake of VW’s troubles. “I haven’t given up on the notion [of consolidation], but I can’t start speculating on what our next moves might be. It has to be discussed with our board,” Marchionne said. “I have had some industry contacts with other people who share this view. My preferences have fundamentally not changed. At the end of the day, this is something that is inevitable. The economic justification is right.”