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Toledo may not keep Wrangler

by David Zatz on

Today, Fiat Chrysler CEO Sergio Marchionne implied that the odds were against the Toledo plant keeping Jeep Wrangler production, despite a recent land purchase and the city’s long history with Jeep in general and CJ and Wrangler in particular.

He did say that, if Wrangler was to find a new home, new product would be moved to the plant:

… if the economic differences that we’re facing between the alternative production location and Toledo were to go away, then I think we would find no reason not to continue to produce the Wrangler in Toledo. But there are significant differences in the capital costs required by the Toledo location of the car, which is really the fundamental reason. … I think last year we sold 1,017,019 Jeeps. Over half of them were produced by the workforce in Toledo, and they have consistently overperformed. There’s not been a single instance where we have made demands for additional production out of Toledo that went unmet.

They’ve twisted into a pretzel, working holidays, working shutdown periods to try to get us there, and I think this organization owes them a lot… That’s why even in the event that the Wrangler were not to go to Toledo, we would find alternative products for them to produce. …

But the Wrangler issue is a very painful issue because of the amount of money involved here. The differences are large. And it doesn’t matter what I do, it’s almost impossible. I know it’s impossible for me alone to make it go away. And they’re large. They cannot be ignored.

We’d have to find a solution that somehow alleviates the cost burden of that plant in some fashion going forward, and certainly it cannot – and I can tell you that now – it cannot come out of the rate structure of our people in Toledo.  I would never ask for a consession from them on this issue, ever. I think it’s unfair.

So it has to come from other parts of the infrastructure, whether it’s the city or the state. We have to find ways in which we could make up the difference. It may take a long time to make up the difference, but we would have to have the confirmation of the fact that for a long period of time the cost structure of Toledo will be substantially lower than it will be anywhere else.

If it can’t come out of labor and it can’t come out of the car because the car is what it is, then it has to come from the surroundings, whatever that may be, whether it’s the city or state. We’d have to find concessions. We’d have to find the package of economic incentives that would make the issue go away. And I’m not trying to throw the ball into somebody else’s yard here and say “Look, it’s your problem. You need to come up with the answer.” I’ve been as open as I can possibly be with both the mayor and the governor on this issue, and I’m going to meet them again in hopefully the next 30 days. I’ll make the point known to them.

I think it is important that we recognize that there is a limit to the amount of economic inefficiency that the FCA or Fiat Chrysler can endure. The investment, it’s not a reflection on Toledo; it’s just it’s a consequence of a set of choices that were made a long time ago in production with the Wrangler. There is a supplier part that operates around the plant. There were technical choices that were made in connection with that architecture. The way in which the car is assembled and painted.

And so we’re wearing the results of those choices. To make those choices irrelevant going forward, it’s going to require money, and so we’re really at the end of an economic discussion. We need to make that problem go away. If we can’t, I think we need to look at a world outside of Wrangler, whatever that is. But having said this, I have every intention of turning myself into a pretzel to try to make the problem go away. But as I get older, I get less capable of turning myself into a pretzel. I suffer the pain a lot more than I would’ve when I was 30.

… The car is due out in ’17. So if you work your dates back from that date, you’re going to have to call the marker within the second quarter of this year. You can’t wait any longer.

David Zatz founded Allpar in 1998 (based on a site he had begun in 1993-94), after years of writing reviews for retail trades. He has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. Before making Allpar a full-time career, he was a consultant in organizational psychology. You can reach him by using our contact form (much preferred) or by calling (313) 766-2304

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