The presentation Friday for investors and media at the Italian-American company’s Balocco Proving Ground is expected to preview product plans and financial goals following the departure of Chief Executive Sergio Marchionne, who plans to step down early next year.
It also will kick off a race among his key lieutenants to succeed him. He leaves the company in strong financial shape, but with a reputation that has suffered from a number of regulatory crises over the past several years involving emissions and safety issues. The latest is a recall announced Friday involving nearly five million U.S. market vehicles to fix a cruise control software glitch.
Mr. Marchionne has been an outsize presence in the industry, having orchestrated a successful merger of two weak brands by jettisoning small sedans in the U.S. and ramping up production of SUVs and pickup trucks. The often brusque and famously open-collared CEO has promised to wear a tie in Milan if the company pays off its debt by June 1, marking what seems to be his first public appearance with neckwear since a 2007 audience with Pope Benedict XVI.
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- Fiat Chrysler CEO Rules Out Selling Brands or Splitting Up Company (Jan. 15)
Fiat Chrysler surprised Wall Street by largely delivering on income goals for this year, outlined in its last strategic plan, which dates back to 2014 and were triple what some analysts projected. The company’s stock price has quadrupled since then and its healthy 6% profit margin is higher than crosstown rival Ford Motor Co.’s 5.2% margin and approaching General Motors Co.’s 7.2%.
Industry officials expect the new strategy through 2022—its third such plan since 2009—to be similarly aggressive. Morgan Stanley estimates Fiat Chrysler could aim to more than double operating earnings and hit profit margins as high as 13%. “We expect that FCA’s [operating] margin targets could rival or even exceed what many premium peers are achieving today,” the brokerage said in an April report.
Key to the future strategy is the crown jewel Jeep SUV brand, which Mr. Marchionne has said could one day grow from 1.4 million in annual unit sales today to seven million—more vehicles than Ford sold globally last year. Morgan Stanley expects Fiat Chrysler to target Jeep sales of up to 3.5 million units by 2022, part of a projected plan to boost total company sales to as many as 7.5 million vehicles by then.
The Jeep and Ram truck brands throw off enough cash to free Fiat Chrysler from a once-crushing debt load and fund investment in next-generation vehicles. The company recently spent $ 3.5 billion to retool its U.S. factories, a process that will culminate in the debut of a brand new as-yet-unnamed Jeep pickup truck next year for the North American market.
Over the next five years, Fiat Chrysler may move to embrace electrified engines and play catch-up in self-driving car capabilities, a shift after Mr. Marchionne for years expressed harsh skepticism about the business case for both technologies. The company ranks among the lowest of all major auto makers globally in its progress toward making money on self-driving car technology, UBS said in a recent report. “We think FCA has limited in-house know-how and has invested less than peers in the space,” the brokerage said.
But the company has signaled its intent to start offering a wider array of gas-electric hybrids and fully electric vehicles and it has quietly built up a team of autonomous car experts in recent months, according to people familiar with the company’s strategy.
Overseeing that transition to higher tech cars will be Mr. Marchionne’s successor, the search for whom he has limited to the ranks of his current executives. Speculation among company officials, Fiat Chrysler dealers and parts suppliers centers on a handful of contenders, most of whom are expected to attend the meeting in Milan. They include Jeep and Ram brands chief Mike Manley, European head Alfredo Altavilla, CFO Richard Palmer, manufacturing lead Stefan Ketter, chief technology officer Harald Wester and marketing head Olivier François —none of whom are Americans.
One main challenge for the new CEO, who the company says won’t be named for another six months, is Fiat Chrysler’s dependence on the U.S. for almost all its growth and profit. European sales are stalled and the auto maker’s share of the Chinese market—the world’s largest—fell below 1% in the most recent quarter.
The new strategy unveiled next week will likely address those sore spots, even as the company looks to establish a bigger presence in other promising markets, such as Latin American and India.
With U.S. auto sales flattening and gas prices rising, industry observers say Fiat Chrysler needs to boost growth abroad quickly. Otherwise, the auto maker’s decisions under Mr. Marchionne to delay investment in fuel-saving technology and kill off small sedans in the U.S. might come back to haunt it.
Write to Chester Dawson at firstname.lastname@example.org