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LONDON, UK / ACCESSWIRE / July 29, 2016 / Active Wall St. blog coverage looks at the headline from the Italian-US auto maker Fiat Chrysler (NYSE: FCAU) as the company plans to stop making small cars in the US by early 2017. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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In order to focus on the production of bigger and popular vehicles, Fiat Chrysler, the seventh-largest automaker in the world, plans to stop manufacturing small cars in America by early 2017, especially the Dodge Dart compact and Chrysler 200.
The Decision
On July 26, 2016, Fiat Chrysler announced that it plans to spend $1.49 billion to equip its Sterling Heights, Michigan assembly plant to make the Ram 1500, which will move from its current plant in Warren when production begins in 2018. The firm's remaining car models will be produced in Mexico, Canada, and other foreign destinations. The company also plans to move production of the replacement for the Jeep Compass and Patriot to Mexico.
Closing the gap with competitors
According to Fiat Chrysler CEO, Sergio Marchionne, as a part of the company's future plans to match competitors – Ford Motor and General Motors - and to increase profit margins, the plants assembling units in the U.S will now be equipped for manufacturing Ram picks ups and Jeep SUV's that are currently in huge demand and reap more profit margins for the company.
Interestingly, in June 2016, the firm's Jeep sales rose to 17%, while the highly publicised during their launch -- Dodge Dart and Chrysler 200 failed to capture the market. During the first six months of 2016, SUVs and trucks sales jumped by 9%, while automobile sales slumped 8%. Of the new car buyers, 58% preferred trucks and SUVs.
Profits and expectations
Fiat Chrysler, in its Q2 FY16 earnings on July 27, 2016, posted net profit of US$253 million, a 25% jump over the same period in 2015, however their total revenue dropped 2% to US$30.68 billion. Meanwhile, General Motors claims that their earnings more than doubled in the second quarter to $2.9 billion.
“By the time we finish with this, hopefully, all of our production assets in the United States — if you exclude Canada and Mexico from the fold — all those US plants will be producing either Jeeps or Ram. I think our biggest task now is to close the operating margin gap with our competitors. That remains a permanent fixation that we have inside the house,” Marchionne said on July 27, 2016.
Revamp plans
The company also plans to spend $1 billion to refurbish its plants in Toledo, Ohio, and Belvidere to create 1,000 new jobs and move production of the Jeep Cherokee from Ohio to Belvidere. Despite Fiat Chrysler's decision to stop producing the Dart and Chrysler 200, Marchionne is looking for a partner who is ready to make those cars for them.
Stock Performance
On July 28, 2016, Fiat Chrysler's shares tumbled 4.78% closing at $6.38 on volume of 9.68 million shares. The firm's stock price has gained 5.28% in the past one month.
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