October 30, 2017 01:00 AM

Double shot of Ram in '18 could strike Silverado

FCA will crank out older 1500s in a bid to bump Chevy

FCA

2018 Ram 1500 Laramie Longhorn Southfork

Heads-up, Chevy.

Ram has a plan, it seems, to knock the Silverado out of the No. 2 spot in the full-size pickup segment in 2018 and cut into sales of the midsize Colorado at the same time.

How? By continuing to build the current-generation Ram 1500 — likely backed by attractive discounts — while ramping up production of the redesigned Ram 1500.

The new Ram, code-named DT, debuts in January at the Detroit auto show. Production will begin the same month at the retooled Sterling Heights Assembly Plant in suburban Detroit. FCA said last week the move to Sterling Heights will expand Ram 1500 capacity by 60,000 trucks annually over current levels.

In addition, CEO Sergio Marchionne revealed that FCA will keep the current Ram 1500, code-named DS, on a single shift at the nearby Warren Truck Assembly Plant through 2018.

That means even more trucks on dealership lots next year.

"I think this is a brilliant plan," said Ralph Mahalak Jr., who owns six FCA dealerships in Michigan, Ohio and Florida. "We can certainly use more trucks."

Truck chase

Ram's pickup has gained ground on the Chevrolet Silverado in 2017.
	Jan.-Sept. 2017	% change
Silverado	418,590	-1.60%
Ram	374,901	3.80%
Automotive News Data Center

Warren Truck builds up to 100 DS Ram 1500s per shift, which could push another 25,000 half-ton trucks onto the market in 2018 — with their development and tooling costs fully amortized.

"The Ram realignment was always designed to allow for parallel production in Sterling Heights and in Warren," Marchionne told analysts last week as FCA reported third- quarter earnings. "Effectively, when we get the new truck up and running at full scale in Sterling we will bring down capacity to one full shift" in Warren, he said. "That will continue indefinitely as long as we see market needs not being satisfied by the overall production capacity. It's going to be an interesting exercise in 2018 as we run it out."

The ramp-up to full production in Sterling Heights should take less than six months. But if dealers and consumers keep buying the DS pickup, Marchionne said FCA will keep making it.

"My expectation is that we'll run the old installation — and at least for the whole of 2018," he said. "Production capacity is confirmed, so it's up to us to decide how long we run it."

Through September, full-size pickup sales are up 5.2 percent, according to the Automotive News Data Center. Ram has closed the gap with the Silverado by about 21,000 trucks compared with last year, and has beaten its crosstown rival in three months in 2017. Ram has never finished ahead of the Silverado for a full year.

Lean stocks

FCA's inventory of unsold Ram pickups is running lean, as are those of the Ford F series and Silverado.

While a 60-day supply is considered ideal for car stocks, automakers have typically considered a 100-day supply appropriate for pickups. That's because of the vast number of models, variants and trims dealers must keep in stock. On Oct. 1, FCA reported 152,000 unsold Ram pickups in inventory, an 84-day supply. Ford reported 240,000 F series trucks in stock, a 76-day supply, and Chevy had 180,000 unsold Silverados, an 85-day supply.

An FCA spokesman declined to comment further on the company's 2018 strategy for the Ram pickup lineup and whether the Silverado is being targeted.

Dave Sullivan, an analyst with AutoPacific, said FCA's motivation likely has more to do with meeting its aggressive 2018 financial targets than bragging rights.

"This is about flexing the profit machine as FCA shows what they are really capable of generating for potential suitors," Sullivan said.

"Ram will probably ramp up some lower cost/higher incentivized trucks based on the outgoing model to take on compact pickup prices," Sullivan said, adding that Ram is likely to argue to consumers that they "can get more truck from Ram for the same price as a Colorado," Sullivan said.

"Because this [current-generation] truck's tooling is amortized, they can offer discounts on it while reducing incentives for the new model. When production stops in Warren and inventory decreases, the hope will be that Ram can hit the reset button for the new Ram and not have it rely as heavily on discounts."

For dealers, anything that brings more Ram 1500s to their lots while pickup sales are hot is welcome news, especially amid a booming construction industry.

Mahalak said: "Most dealers, will order the new truck as a high-line vehicle, and the old truck as more of a base offering.

"It will increase the number of trucks we're able to offer and the price points as well."