Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: How Big Can Jeep Get?
So maybe Fiat Chrysler’s sale of Jeep, and Jeep alone, to a Chinese automaker is not going to happen after all. All along it seemed rather farfetched, and according to most analysts and people with eyes, short-sighted considering Jeep’s value in the long term. Jeep is an incredibly valuable brand. Selling it off for cash up front would be a cosmically stupid move on FCA’s part.
In fact, as it stands now, FCA sees Jeep as the crown jewel of its company, something that could ride the SUV wave to become as big globally as a standalone automaker. So they dream, according to Bloomberg:
While automakers around the world covet Jeep for its strong growth and fat profits, Fiat Chrysler Automobiles sees potential for much more, banking on the rugged brand to vie with global giants like Toyota, Volkswagen and Ford.
FCA is forecasting Jeep’s annual sales to jump about 30 percent next year to 2 million vehicles and predicts the brand could eventually deliver 7 million units a year as appetite for SUVs surges worldwide, CEO Sergio Marchionne has told analysts. That would continue impressive growth for what was once a niche offroad brand, with little more than 300,000 deliveries in 2009, when Fiat took control of Jeep as part of its acquisition of Chrysler.
[...] Even if Marchionne has plenty of reasons to see more growth ahead for SUVs, that level of expansion would be unprecedented. Jeep would need at least one model to sell more than 1 million a year. Only the Toyota Corolla, an affordable bread-and-butter compact that’s unlike anything Jeep offers, averaged that much global volume since the start of the decade, according to IHS Markit.
While Marchionne, 65, helped stoke speculation about Jeep’s future by saying FCA could spin off more divisions like it did with its Ferrari supercar unit, the brand is all but untouchable, despite drawing interest from China’s Great Wall Motor Co., as first reported this week by Automotive News. Jeep has emerged as a the focal point of the automaker’s mass-market car plans, without which the company could scarcely attract a partner necessary to weather the disruption looming over the auto industry.
“I don’t see how FCA could sell it,” Maryann Keller, a longtime industry analyst and consultant, said of Jeep. “Whatever they got for it would hardly replace what they lost.”
Optimistic but plausible. If the SUV boom is really here to stay, why not? What else does FCA have going for it in terms of mass volume?
2nd Gear: Yet More Spinoffs May Happen
For years Fiat Chrysler sought a merger with another automaker to bring costs down and reduce its own debt. But one answer to that, that same Bloomberg story notes, is to spin off its two Italian luxury brands the same way it did with Ferrari a while back.
Fiat Chrysler executives are considering options including a plan to spin off the upscale Maserati and Alfa Romeo divisions and its car-components operations, according to people familiar with the discussions. The company intends to keep Jeep to anchor the mass-market car business that also includes the Dodge and Ram brands, said the people, who asked not to be identified because the deliberations are private. A Fiat Chrysler spokesman declined to comment.
[...] Spinning off Maserati, Alfa Romeo and parts divisions including Magneti Marelli, Teksid and Comau probably would help toward Fiat Chrysler’s goal to eliminate 4.2 billion euros in debt by the end of next year. The luxury-car operations could be worth as much as 7 billion euros, while the components businesses may fetch up to 5 billion euros, analysts estimate.
Does FCA know what it’s doing? Then again—does anyone?
3rd Gear: Apple’s Car Ambitions Are Far More Modest Now
Remember the brief period when everyone thought an “Apple Car” would mean this total paradigm shift in transportation? Maybe under Steve Jobs, assuming he lacked the good sense to not get into cars. But Apple’s not as out there as it used to be, and the New York Times reports that what was once Project Titan is now starting out as an autonomous shuttle bus service for some Apple employees in California. When they get it to work:
The project’s reduced scale aligns Apple more closely with other tech companies that are working on autonomous driving technology but are steering clear of building cars. Even Waymo, the Google self-driving spinoff that is probably furthest along among Silicon Valley companies, has said repeatedly that it does not plan to produce its own vehicles.
Apple’s testing vehicles will carry employees between its various Silicon Valley offices. The new effort is called PAIL, short for Palo Alto to Infinite Loop, the address of the company’s main office in Cupertino, Calif., and a few miles down the road from Palo Alto, Calif.
Apple’s in-house shuttle service, which isn’t operational yet, follows Waymo, Uber and a number of car companies that have been testing driverless cars on city streets around the world.
But internal disagreements on the direction of the car, and what it should do, ultimately doomed the project. There’s a lot to unpack from this and we’ll have more on it later today, but the life and death of the Apple Car is one of the more interesting business stories we’ve seen this decade. And there’s probably a ton we don’t know.
4th Gear: Can The Hyundai Santa Cruz Sell?
We love the idea of a smaller crossover truck from Hyundai, something small enough to be easy to park but practical enough to throw camping gear or a motorcycle in. Every auto writer I know digs the idea. But it’s just not how Americans buy trucks—the recent success of the new Honda Ridgeline notwithstanding—where bigger and badder and more expensive is always king.
Will it be a success, or the next brown diesel manual wagon? The Detroit Free Press votes the latter:
The things we admire about the Ridgeline and Santa Cruz are not the reasons most people buy pickups. Car reviewers sometimes make the mistake of judging innovative small pickups by the same criteria as the cars we like, not the pickups Americans buy.
That’s not to say you should disregard the judgment of critics and auto writers. Well, not my judgment, anyway. What people like me have to understand is that there’s a difference between liking a vehicle and understanding why people will buy it. Or why they won’t.
Listen to Anita Burke, chief engineer of GM’s successful Chevrolet Colorado midsize pickup. She’s internalized the voice of the customer to the point that she probably hears it in her sleep.
“The customer wanted the versatility of a pickup box, but not to give up comfort and features that are in every other vehicle,” Burke says.
Her team responded with a truck that was more capable than the competition, not less. The result: 61,507 Colorado sales this year, second only to the Toyota Tacoma among midsize pickups.
Guess we’ll see, but I’m hoping Hyundai can figure it out.
5th Gear: Audi Shuffling
The specter of Dieselgate is still causing chaos at the Volkswagen Group’s luxury division, reports Reuters:
Sources said last month the board was preparing to replace finance chief Axel Strotbek, production chief Hubert Waltl, human resources head Thomas Sigi and sales chief Dietmar Voggenreiter.
However, they added CEO Rupert Stadler, who has come under fire from the media and unions for his handling of the group’s emissions scandal, would stay as he still has the backing of the Porsche and Piech families that control Volkswagen (VW).
“This should happen relatively smoothly,” one of the people said.
Reverse: Hail Maria
Neutral: Does FCA Know What It’s Doing?
Merger attempts with GM and VW went nowhere. The ambitious five-year plan had to be mostly scrapped. Now we’re talking brand spinoffs and whatever’s happening with Jeep. What’s going on here?