FCA trims output at 4 plants after backlog

Industry

A year ago, the Jeep Cherokee was riding high, becoming the brand’s biggest seller behind the Wrangler after a midcycle update gave it fresher styling and more cargo capacity.

But a 20 percent plunge in Cherokee sales for 2019, including a 30 percent drop in the fourth quarter, has prompted FCA US to idle its Belvidere Assembly Plant west of Chicago for the next two weeks. The automaker is working to pare inventory of the Cherokee and other vehicles after winding up with a backlog of unordered vehicles that it attempted to unload on dealers with the help of incentives that rose to as much as $3,000 by late December.

FCA also is temporarily shutting its minivan plant in Windsor, Ontario, for two weeks after sales slid 17 percent for the Chrysler Pacifica and 19 percent for the Dodge Grand Caravan last year.

Two assembly plants in Mexico — Saltillo Truck, which builds the Ram 1500 Classic and Heavy Duty pickups, and Toluca, which makes the Dodge Journey and Jeep Compass — will have scattered downtime this month as well.

All of the shutdowns were scheduled to ensure production is aligned with demand for the vehicles, a spokeswoman said.

The idlings follow FCA’s implementation of a predictive analytics system tasked with anticipating what vehicles dealers would need to order, as Bloomberg reported in November.

“They start you out with a $300 marketing allowance,” said one dealer, who spoke to Automotive News last week on condition of anonymity. “Then they bump you to $1,500 two weeks later, and then the day after that, two days after that, they give you double coupons worth $3,000.

“How can you possibly say that that is a good consumer experience?” said the dealer, who provided copies of emails from FCA representatives corroborating the incentives. “I’m on a couple of committees here, and my phone is lighting up with other dealers saying, “What are we doing?’ ”

The incentive fluctuations, the dealer said, could lead to consumers thinking they overpaid when a sweeter offer becomes available soon after their purchase.

FCA had 53,000 Cherokees in inventory on Jan. 1, a 97-day supply, the Automotive News Data Center estimated, up from a 91-day supply a month earlier.

Normal output at the Belvidere and Windsor factories will resume the week of Jan. 27, the company said.

FCA invested $350 million in the Belvidere plant to produce the Cherokee starting in mid-2017, when production was moved from Toledo, Ohio.

But last year, about 1,400 people were laid off when output was reduced to two shifts from three. The plant now employs around 3,700 workers. It also briefly shut down in August to match production with demand, according to the Rockford Register Star.

The contract with FCA that UAW members ratified in December calls for a $55 million investment in Belvidere. Cherokee production is slated to continue, with next-generation safety features added in 2020, according to the labor pact.

Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said it’s good to see FCA halting output for a few weeks to get inventory in line, but that won’t solve the Cherokee’s ills. Fiorani said the automaker also needs to increase sales of “what is already an old product two years before the next generation comes along.”

Getting sales up will be a challenge with the Cherokee facing so much stiff competition, Fiorani said.

“Everybody’s coming out with a really attractive product to compete against them — between new Hyundais and new Kias and new Toyotas and everybody else entering the space,” Fiorani said. “It’s a lot to deal with, and the Cherokee’s just getting a little old right now.”

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