FCA Profits Up, Debt-Reduction Plan on Track, CEO Says

FCA US expects to earn U.S. EPA certification of its ’17 light-duty 3.0L EcoDiesel V-6 “relatively quickly,” with a simple software fix solving alleged emissions violations in ’14-’16 model-year Ram pickups and Jeep Grand Cherokee SUVs fitted with the engine.

“We are in the midst of a series of pretty intense discussions with both the EPA and (the California Air Resources Board) on the certification of the 2017 model Ram 1500 and Grand Cherokee diesel,” FCA Chairman and CEO Sergio Marchionne tells analysts during a presentation of the Italian-American automaker’s 2016 financial results.

“Those discussions are proceeding well and I think they are a confirmation of the goodwill we’ve established with regulatory agencies for a number of years,” Marchionne says. “Hopefully this will bring ’17 (model-year) certification to a conclusion relatively quickly and allow us to deal with ’14, ’15 and ’16 model years with a simple software re-flash.”
The EPA cited FCA Jan. 12 for allegedly installing and using undisclosed defeat devices allowing the engine to emit increased levels of nitrogen-oxide pollution in violation of the Clean Air Act.

The notice of violation cites engines installed in model-year ’14-’16 Ram 1500 pickups and Jeep Grand Cherokee SUVs. More than 100,000 vehicles equipped with the engine have been sold. FCA stands by its diesel-powered vehicles, saying they meet all applicable regulatory requirements, and its emission-control strategies do not constitute “defeat devices” under applicable regulations.

The diesel issue aside, the automaker posted a $1.9 billion net profit on $6.5 billion in global earnings in 2016. North America sales were down slightly to 2.6 million units for a 12.6% market share.

Marchionne says FCA is focused on meeting targets outlined in its 5-year plan to eliminate debt by 2018, with debt now reduced to $4.9 billion.

“We are now 60% done with 2014-2018 plan,” Marchionne says, with “methodical progress” on cost reductions and product mix changes now allowing the company to focus on meeting the goals specified in the plan’s final two years.

FCA has been aggressively overhauling its product portfolio in the past year, eliminating the Dodge Dart and Chrysler 200 small cars and ramping up production of Ram trucks and commercial vehicles and Jeeps.

Boosting utilization of FCA’s plant in Belvidere, IL, is among FCA’s priorities in 2017, Marchionne says, with the end of Dart/200 production in December and addition of Jeep Cherokee capacity there.

Marchionne signals another shift could bring Ram heavy-duty pickup production to Michigan from its current production plant in Mexico, depending on policies and incentives put in place by the Trump Admin.

“The repatriation of the Ram heavy-duty truck is possible,” Marchionne says. “The infrastructure to execute that is in place and, given the right motivation, it could be accomplished quite easily.”

The FCA chief executive declined to elaborate on the implications of bringing all automotive manufacturing back to the U.S. from Mexico, other than to say “there would be monumental consequences to the industry.”

[email protected] @bobgritzinger