NewsThis really is the 2018 Wrangler “JL” • Red vs black keys: Real-world Hellcat performance • Windsor loses Transport

Hello, Allpar Forums member or visitor! If you were a member, you would not see this ad!

Register or log in at the top right of the page...

  1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Sergio confirms media went out of context with VW,defends killing Dart,200

Discussion in 'Mopar News and Rumors' started by Alexbucks, Mar 16, 2017.

  1. DAGAR

    DAGAR Member

    Likes:
    646
    I disagree. There is future product planned for Belvidere that needs that capacity and in the meantime they hope to be pumping out a ton of refreshed Cherokees to meet demand. They, you, I could be wrong about Cherokee demand, but would it really make sense to trade Cherokee production for small numbers of Dart and 200 that wouldn't be advertised or even stocked by most dealers without big incentives? The argument that the sedans are needed to attract people to the showroom is a red herring as there is still stock available and the advertising would be no different than now as stated above. I wish they had been successful enough to keep too, but they just weren't.
     
    Prabhjot and ScramFan like this.
  2. Dave Z

    Dave Z It's me, Dave Staff Member Supporter

    Likes:
    12,860
    I do suspect very few people went to dealerships hunting down the 200, though it was a fine and highly competitive car, or the Dart, after the first couple of months when there wasn't any stock anyway.
     
  3. DAGAR

    DAGAR Member

    Likes:
    646
    The resale si poor because the 200 was dumped in fleets and in retail with huge incentives causing new supply to be much greater than normal demand, but now all that supply is coming onto the used market and there is no corresponding factory support to artificially increase demand, so low resale value... Sorry for those who own and are affected (my advice keep it - all cars are worth noting at the end). But for those looking for a vehicle those low prices put someone in a darn good car at a really good price
     
    Prabhjot likes this.
  4. Erik Latranyi

    Erik Latranyi Well-Known Member Level III Supporter

    Likes:
    7,671
    Good thinking, but flawed.

    The money spent to develop Giorgio is gone, done, burned-up. They will never get that back.

    Even worse, is that the INVESTMENT they made is not paying them back anything! The break-even on a new platform in one assembly plant was 100,000 units per year under the old Chrysler. I am sure with the inefficiencies and delays in Giorgio, that break even point is higher.

    But, let's use the 100,000 units figure. They will not sell 100,000 units of Giorgio this year, meaning each unit sold is negative margin. They will not sell 100,000 units next year, so another year of negative margins.

    Every year that volume (in one plant) does not rise above 100,000 units, is a year of losses.

    What has milking the old engineering and tooling done for them? 6 straight months of declining sales now, but 4 years away from anything that will create volume for Giorgio.

    Do you think that is wise strategy?

    In business, you try to get a payback on capital investment in less than a year. Beyond that, it becomes more difficult to justify. Giorgio will not have a payback in at least 3 years after it was launched and that is if they build everything in the same plant. Once Giorgio is given to Maserati and Jeep and Dodge, each plant will need to sell 100,000 units per year to break even.
     
    somber and valiant67 like this.
  5. DAGAR

    DAGAR Member

    Likes:
    646
    Eric, that's not how cash flow works and it's cash flow that pays off the debt. If they leverage Giorgio for Jeep and Dodge as suggested, as long as they produce the total volume planned over the lifetime of the vehicle, is has little impact on the total margin received from the Giorgio investment. Grated the numbers are a little different because of he time value of money the risk that the life of Giorgio gets shortened, etc. but starting to build Dodges or Jeeps on Giorgio tomorrow rather than on WK2 and LX would actually erode margin because of the investment that would have already then been spent on engineering the Jeep and Dodge vehicles. (Hopefully it's being spent now as purported). the reality is they are simply leveraging already paid for vehicles longer and the Giorgio expense to date is sunk cost. It doesnt' affect cash flow on Alfa, Dodge or Jeep sales.
     
    Alexbucks and Prabhjot like this.
  6. Erik Latranyi

    Erik Latranyi Well-Known Member Level III Supporter

    Likes:
    7,671
    You forget the fixed costs of every assembly plant that is not producing more than 100,000 vehicles at positive margins. They are not generating positive cash flow with Giorgio in Italy because they are not selling more than the break-even point of that assembly plant.

    Yes, the break-even is lower because the platform is shared, so when Jeep starts building Grand Cherokees, it still has to cover the fixed costs of plant and equipment.

    If the engineering for each vehicle is so expensive, then sharing Giorgio is not returning the savings they want. The idea of platitecture sharing is to reduce overall costs. If the cost to adapt Giorgio to Jeep's needs is close to what Jeep would spend on a whole new platform, then the company blew it big time.
     
    somber and valiant67 like this.
  7. DAGAR

    DAGAR Member

    Likes:
    646
    Remind me... which are the plants (other than closed for refit) that aren't producing at least 100k units? Those would have been Belvidere (post patriot/compass) and SHAP (200). Are you suggesting that the Alfa plant would be cranking Dodge's and Jeeps? I think you are too focused on individual plant profitability rather than the whole. I've had P&L responsibility and things just don't work the way you are suggesting. Yes the Alfa plant is underutilized, but does Stelvio resolve that? NEW GC perhaps built at that plant for global consumption might help, but also might not be worth it depending on volumes and differences that would increase overall product cost due to complexity. For that we'll have to wait and see.
     
    Alexbucks and Prabhjot like this.
  8. Erik Latranyi

    Erik Latranyi Well-Known Member Level III Supporter

    Likes:
    7,671
    I have P&L responsibility. Every plant in a manufacturing environment is its own P&L and must generate positive margins or changes will be made.
     
    valiant67 likes this.
  9. DAGAR

    DAGAR Member

    Likes:
    646
    I think that's probably the difference in our POV. My experience is corporate-wide and I would never measure by aggregating individual plant performance. I would and have set targets for each operation based upon what will maximize current and future organization level results and this means very different levels of margin, cashflow, etc. for individual entities. I get how it can suck needing to make numbers that will cover costs that individual managers didn't even have a say in - I'm that guy who set those numbers.
     
  10. MJAB

    MJAB Active Member

    Likes:
    1,799
    And who says that the break even point is at 100k?
    Each project / model have different break even points.

    So how does Ferrari a 16% profit per vehicle? How does Porsche have a 17/18% profit per vehicle? How can BMW with its series 7? ... ?
    How can manufacturers do limited series?

    If one doesn't know real numbers: R&D costs and how are split over time, or how much of plant investment are product specific, ... ... cannot calculate economic/financial results.
     
    Prabhjot and ScramFan like this.
  11. MJAB

    MJAB Active Member

    Likes:
    1,799
    That sentence shows that You maybe doesn't have a complete idea of what a "family of architectures" is in FCA.
    Just a silly example: the steering rack (or racks) are shared, A/C system (with its variants) are shared, the fuse box, connectors, .. . are shared, .... ....
    High costs for passive safety are shared since the "bones" are common for many different models (for example all frontal part of Jeep Renegade, Jeep Compass, Fiat 500X, Fiat Toro are the same or very similar for structures, the ones that are the core of passive safety).
    All ADAS system are shared and so on.

    That is what allows economy of scale.

    The costs to do a Jeep over the Giorgio architectures are less less than doing one new, since from start it was designed with that needs when engineered.
     
    Prabhjot and ScramFan like this.
  12. GasAxe

    GasAxe Active Member

    Likes:
    3,048
    100k was the quoted number of units sold per year by platform to break even pre-FCA. The LX platform with one model (300) had to hit 100k. Add some cost to make a Charger and now the total units sold between the two is ~110k/year. Add a third model, Magnum/Challenger, now the number of units bumps slightly again but is split between the 3 models.

    I can't say how the current setup works or how many units sold/year is needed to break even under the patitecture system, but I do know a luxury/exotic has so much markup the units sold/year can be way lower or a halo car can be just a write off. It was noted in the bankruptcy that the Viper was one of a few vehicles that was still profitable. So until a very reliable source can give us something better, 100k of sales/year is the best we've got to go on.
     
  13. MJAB

    MJAB Active Member

    Likes:
    1,799
    Break even point is function of many different parameters and is also influenced by decisions taken of product cycle life, imputation of harmonization of tools, direct costs, ....

    For example the price at which the product is sol by the company.
    Same product, same production line, same software, ...: one is MJAB brand and one is Apple brand.
    MJAB phone is sold to reseller at 200 dollars, Apple ones at 400.
    Well if my break even point is 300k units, Apples one is 150k. I start to make money at phone 300,001 and Apple at phone 150,001.
     
  14. GasAxe

    GasAxe Active Member

    Likes:
    3,048
    As I said, the information was direct from Chrysler (Bob Sheaves). Nothing more exact has been given since so anyone can make up any reasonable scenario at this point. 100k is the best known number available.
     
    Erik Latranyi likes this.
  15. Erik Latranyi

    Erik Latranyi Well-Known Member Level III Supporter

    Likes:
    7,671
    We have had this discussion. You cannot share HVAC system between widely different vehicles. Bob was very clear on this. An HVAC system that was developed for the Giulia will not be sufficient for a Charger due to the different volumes and glass area. So, that is a load of crap.

    Besides, sharing "parts" is Model T technology that the auto industry has used for decades. If FCA just started sharing things like fuse boxes, they are in the dark ages of auto technology.