Expect Production Changes to go Along With Fiat-Chrysler’s Revised Product Plan

The refinement to Fiat-Chrysler’s U.S. product plans revealed earlier this month by CEO Sergio Marchionne answered a lot of questions on the retail front, but strengthens my expectations that a significant realignment in its North American vehicle assembly operations is on tap.

Fiat, the parent company of Chrysler, gradually has pulled nearly all the planned Lancia export models and Alfa Romeo products from its North American manufacturing plan, ostensibly to fill severe capacity shortfalls at its plants in Europe.  And if rumblings that it might move the Fiat 500 out of the Toluca, Mexico, plant are true, that would take roughly another 75,000 units of annual volume out of the picture.

Fiat already has canceled U.S. production plans for a Maserati SUV and Alfa Romeo C-Sedan. The Lancia Flavia, Grand Voyager and Thema, built in the U.S. and Canada, are not scheduled to be replaced at those facilities after their current  lifecycles are over, based on WardsAuto/AutomotiveCompass global forecast.

Relatively speaking, volumes of these vehicles are not significant overall, but they point to a potential problem Chrysler could have keeping capacity full at a cadre of its North American plants.

At issue are current and future Chrysler, Jeep and Dodge products coming off the Fiat engineered C-Evo platform. As of now, four plants will be assembling vehicles from that platform:  Belvidere, IL; Sterling Heights, MI; Toledo North, OH; and Toluca.

The products will include small and midsize cars and cross/utility vehicles, including a forthcoming replacement for the Jeep Liberty, likely called Cherokee, and a replacement for the midsize Chrysler 200. As of now there is no known replacement at Sterling Heights for the 200’s Dodge Avenger sibling.

The new Dodge Dart already in production at Belvidere is off the same platform, and a Chrysler version, perhaps called the 100, is expected to start production there in 2015.

At mid-decade, volume for these vehicles could be hardpressed to maintain even near the 87% capacity utilization the four plants combined for in 2012, especially if the Fiat 500 move is made.

Most affected would be the three U.S. facilities.

The Toluca plant still should have solid utilization, although it would fall well below the 118% rate it recorded for 2012, and probably below 100%. Besides the 500, Toluca builds the Dodge Journey and Lancia Fremont, a variant of the Journey that is exported to Europe, and doing well there. In fact, it eventually could be the only Fiat product built in North America.

However, Journey/Fremont, currently based on Chrysler’s mid-CUV platform, move to the C-Evo architecture in two years, meaning it would be easier to transfer Fremont production elsewhere if Fiat wants to.

No matter how good the products are, it’s unlikely each program -- Dart/100,  redesigned 200, Liberty replacement, Journey/Fremont -- individually will succeed in reaching volumes to fill capacity at each of the plants where they are built. 

They could all be great products, well received by consumers, but expecting each program to attain the 200,000-plus units per year needed to keep their respective factories even near 2-shift capacity is a stretch considering new competitors coming that will crowd the market.

There very well could be a reconfiguration of the manufacturing footprint, at least as it pertains to these vehicles, announced sometime within the next two years.  It could mean consolidation, such as transferring products from Canada to the U.S. and Mexico or to Mexico from both Canada and the U.S.

On the bright side, Fiat could still add product to shore up its North American capacity.

Toluca is said to be a candidate for new models that would be built for export to South America.  And Chrysler could decide Dodge dealers should have a North American-built midsize sedan after all.