FCA Targets Mid-May North American Restart

Fiat Chrysler Automobiles plans to resume production in North America the week of May 18, according to CEO Mike Manley.

Outlining the automaker’s plans during a quarterly conference call with financial analysts, Manley (below, left) says the restart of North American production will be gradual. FCA successfully resumed production in China at the end of February and in Italy at the end of April, a week before the reopening of the Italian economy generally.

In Italy, FCA was able to ramp up “faster than expected,” he says.

Manley notes FCA, which shut its North American plants March 18 to prevent the spread of coronavirus, will reopen factories in the U.S., Canada and Mexico with a lift from strong consumer demand, particularly for Ram pickup trucks.  The company’s inventory of unsold pickups is about 420,000 units, which is on the low side, he says.

Given the number of different models in the Ram lineup, there even could be shortages of some models as FCA restarts production, he says.

“We will begin running our plants with a much higher level of dealer orders than people might expect,” Manley says. While FCA could lose some discretionary purchases on the passenger-car and crossover side of the business where consumers can postpone purchases, trucks are required by many customers who count on them for employment, he says.

Longer-term prospects for government stimulus that includes spending on infrastructure also will bolster pickup demand, Manley predicts.

Twenty-two FCA employees around the world have died from COVID-19 and Manley emphasizes employee safety is the automaker’s chief concern as it resumes production. FCA will continue to make personal protective equipment at plants in China, Brazil and the U.S. both for its own employees and for first responders and health-care workers.

The UAW, which indicated earlier it would not support U.S. auto plants reopening in early May, did not take issue with Manley’s announcement.

“As for the start date, the companies contractually make that decision and we all knew this day would come,” union President Rory Gamble says in a statement issued after the FCA conference call. “Our UAW focus and role are, and will continue to be, on health and safety protocols to protect our members.”

Gamble says a joint union-management task force targeting the pandemic was created to engage in an ongoing dialogue on health concerns and to address recommendations from the federal Centers for Disease Control and World Health Organization.

“Our volunteer members and the companies have done great work to reconfigure plants to achieve this safety goal,” Gamble adds.

Manley says the pandemic shutdown has been an unmistakable and unwelcome shock to FCA. The automaker lost $1.8 billion (€1.7 billion) during the first quarter as revenues dropped 16% and suffered a $3 billion (€2.8 billion) negative cash flow.

Nonetheless, FCA has enough resources to survive a drastic shortfall in revenue even during a recession lasting into 2021, Manley says. “Clearly the industry is under a lot of stress,” he says. “I think the pandemic will be with us for the foreseeable future.”

Michael Manley FCA CEO (Getty)_3

Manley says some of the automaker’s new-product introductions will be delayed and various R&D projects trimmed to save money.  “We haven’t canceled any projects,” he notes, adding projects dedicated to electric vehicles and plug-in hybrids required for compliance with new regulations, particularly in Europe, are being funded.

FCA also has cut its marketing budget significantly as part of the cost-cutting effort and halted projects done by outside contractors. Fifty percent of the temporary cost savings targeted by the automaker during the pandemic have come from sales and marketing, he says.

In addition, the proposed merger with French automaker PSA is moving ahead and will be complete before the end of the year, Manley says.

FCA was off to a promising start in 2020 before COVID-19 forced a shutdown of the global economy and the company should be able to regain its momentum, Manley says.

“I think what we are doing will shape our business in the future,” including more sales being done online, he says.

Manley admits to being something of a traditionalist who did not think much of people working remotely. The experience during the pandemic, though, has changed his mind: “I have been pleasantly surprised,” he says, noting employees have been productive and efficient even though they haven’t been in the office for weeks.