To make more Ram trucks, Fiat Chrysler rethinks Mexico

AUBURN HILLS, Mich. (Reuters) – The new CEO of Fiat Chrysler Automobiles NV is tired of being No. 3 pickup truck sales in the US.

Assembly workers of Fiat Chrysler Automobiles build 201 Ram Pickup Trucks at the FCA Sterling Heights Assembly Plant in Sterling Heights, Michigan, USA, October 22, 2018. Reception October 22, 2018. REUTERS / Rebecca Cook

With a strategy to load its revamped Ram 1500 full-size trucks with new features – from 12-inch touchscreens on the dashboard to large battery packs and electric motors to adjust speed and gears and save fuel – the automaker continues a sustained increase in demand.

Mike Manley is now rethinking a decision announced in January to halt the construction of Ram high-performance pickups at a plant in Saltillo, Mexico. This facility and another in Warren, Michigan, between them would produce other ram models and release production capacity to bring even more new trucks into the sales of Ford Motor Co's F-Series or General Motors Co's Chevrolet To bring Silverado. End of GMC Sierra.

"We need to be in second place," said Manley Reuters exclusively in his first interview since acquiring the world's largest automaker # 7 after the sudden death of Sergio Marchionne. "Honestly, I do not care which of them I share."

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When US President Donald Trump threatened to impose a 25 percent tariff on Mexico-made pick-ups earlier this year, Fiat Chrysler said Saltillo would be "reused for the production of future commercial vehicles."

In 2017, Marchionne had considered the possibility that his company could relocate the production of heavy trucks from Saltillo, as the US tax and trade policy would influence the decision.

Now, the United States, Mexico and Canada have a preliminary trade agreement that does not impose an upper limit on pickup shipments to the United States of Mexico, provided they meet thresholds for the proportion of parts produced in the region.

"With a combination of Warren and Mexico, we build what we call the classic truck enough production to increase production next year when needed," Manley said.

"In my opinion it will be necessary, we will win a share, of course I keep looking, but it is an incredibly competitive segment," he added.

The Ram and Jeep brands underpin the automaker's North American business, which accounted for nearly 85 percent of Fiat Chrysler's pre-tax profit in the second quarter, and offset the difficulties of its old Fiat business in Europe and its operations in China.

Ford F-Series trucks have led the segment for four decades. In 2017, Ford accounted for 35.6 percent of retail sales in the US, followed closely by GM at 34.2 percent and FCA at 22.3 percent.

Pickup trucks are the only major contributors to the profits of the Detroit Big Three automakers, so there's a lot at stake as they struggle for market share.

GM has launched a new version of its Silverado truck in the fight for the pick-up, focusing on weight reduction and reducing production costs in competition with the market leader Ford.

Fiat Chrysler, who announced third-quarter earnings on Tuesday, took a different direction with the new Ram. The automaker stuffed more features into the vehicle – including an optional 12-inch touchscreen and a partial electrification that saves fuel and helps with acceleration and cruise control – in a bet that customers would pay more in return.

So far gambling seems to pay off. The average selling price of the new Ram 1500 for the current year through the end of October, according to industry sources reached 46,856 US dollars, more than the average of 42,389 US dollars for the Ford F-150.

Hayden Elder, owner of Elder Chrysler's Dodge Jeep Ram in Athens, Texas, said three times in less than a month that he was trading families with nearly new big SUVs from FCA rivals for a new Ram 1500.

"This new Ram is the biggest jump I've ever seen from one version to another," Elder said. About 70 percent of the 800 vehicles it sells each year are trucks.

"Did not find the blanket yet"

Phil Jansen, Fiat Chrysler's Product Development Manager, said when his team began redesigning the Ram 1500, they decided that a lighter all-aluminum body – which Ford used for their trucks – was too expensive. GM executives came to the same conclusion.

But Fiat Chrysler took a chance that GM did not have, adding a large battery pack and an electric motor that helped with acceleration and shifting, plus a gentle start-stop feature that keeps the engine idling when in traffic and so increases fuel consumption.

"Average stops can save that much fuel," said FCA electrification manager Brian Spohn, holding up a small glass of water.

The decision to offer a larger dashboard screen than its rivals came late in the design process. Initially, the big screen was offered in the top three of the six versions of the truck. Fiat Chrysler has since decided to offer it on an additional version.

The demand is so high that the company can provide the provider of the screen with as many sources as possible for a source familiar with production schedules.

"We have not yet capped what US customers want to pay for additional features," said Jim Morrison, head of the Ram brand in North America.

Fiat Chrysler had problems earlier this year accelerating production of the new Ram truck on a highly automated production line installed at a plant in the Detroit area that previously produced slow-moving sedans.

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Among the problems: knocked-off bolts and other debris would shut down automated vehicles that carried truck frames through part of the assembly process. The solution was to dump debris over the carriers, FCA managers said in a recent factory tour.

Now Sterling Heights Assembly Plant turns around 65 trucks an hour, 20 hours a day, six days a week – a pace of about 400,000 vehicles a year.

"It is capable if we wanted to push it further up from there," Manley told Reuters. "It is clearly important that we are able to fulfill our ambitions."

Report by Nick Carey; Editing by Joe White and Edward Tobin

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