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  1. Today was Fiat Chrysler Automobiles' earnings report day and the results for the past year was a bit mixed. FCA reported a profit of 377 million euros (about $410 million) for 2015. This is a large decrease compared to the 632 million euros (about $689 million) profit for 2014. FCA attributes the decrease to investment costs and a large number of recalls on their vehicles. For the year, FCA said reported adjusted earnings increased 39 percent to 5.3 billion euros (about $5.75 billion) thanks to a strong performance in North America and a European market that is recovering. Total global deliveries for 2015 were 4.6 million vehicles. This is in line with 2014, but falls slightly short of FCA's goal of delivering 4.8 million vehicles. Along with the announcement of earnings, FCA has updated its five-year business plan. Here are the highlights: FCA will be shifting North American production capacity to produce more SUVs and trucks. The reasoning behind this comes down to the company believing low fuel prices will be “permanent” and expects the trend of consumers going toward utility vehicles and pickups to continue.This move will affect the Chrysler 200 and Dodge Dart. FCA CEO Sergio Marchionne both “will run their course,” likely meaning we will not see a second-generation of either model. [*]Alfa Romeo's product plans has been realigned once again (insert shocked face here -WM) Reason for this comes from "uncertainties" in China and giving the brand extra time to "guarantee proper global distribution network execution." Manufacturing, product investment, and R&D investments slimmed down till 2018. The planned product lineup (including a hatchback, full-size sedan, two utility vehicles, and two speciality vehicles) will now be completed by mid-2020 The Guila is still planned to go into production and launched this year. A midsize utility vehicle will be launched late 2016/early 2017 [*]The next-generation Jeep Wrangler will be coming out in 2017 with a variety of new powertrains and a pickup version. 2018 will see a mild-hybrid and diesel powertrain options being available. 2022 will see a full-hybrid Wrangler. This is part of a plan to meet new regulations. [*]Ram is also expected to get a mild hybrid system sometime in 2020 or so Source: Automotive News (Subscription Required), 2, The Detroit News
  2. Fiat Chrysler Automobiles have been a bit behind the curve when it comes to alternative powertrains. But the Chrysler Pacifica Plug-In Hybrid shows the company is beginning to catch up. Speaking with The Truth About Cars, FCA's global hybrid chief Michael Duhaime said that hybrid power found in the next-generation minivan is very scaleable. “This’ll be the largest footprint — in the Pacifica. As we get into the smaller vehicles, basically what we’ll do is put smaller electric motors. The power electronics is part of the transmission … all that stays consistent. We’ll just go with smaller motors, and then the final drive will change with the different vehicles,” said Duhaime. Compared to the old two-mode hybrid system, the new system uses planetary gears to increase variability and efficiency for the three modes, not a set of fixed gears. Also, the new system can be used in a number of front-wheel drive models. Two-Mode was never used on a front-wheel drive vehicle, only the four-wheel drive Chrysler Aspen and Dodge Durango. Source: The Truth About Cars
  3. Audi can now use Q2 and Q4 for future models thanks a new deal with Fiat Chrysler Automobiles. Audi CEO Rupert Stadler tells Autoblog that the German automaker has done a trademark swap to get their hands on Q2 and Q4. It is unknown what FCA got out of the deal. "We tried to get it years ago and they said 'No, never,' but there is never 'never' in business. ... This year I went back to them with a proposal and we talked and there were some negotiations and then we agreed to it," said Stadler. Q2 was used by FCA to denote vehicles equipped with a limited-slip differential (mostly used on Alfa Romeo vehicles). Q4 denoted vehicles with all-wheel drive (used on Alfa Romeo and Maserati vehicles). Audi plans to use Q2 and Q4 on upcoming crossovers. The Q2 will be used for a crossover based on the MQB platform and Q4 will be on a coupe-like version of the Q3. Source: Autoblog
  4. FCA CEO Sergio Marchionne is giving it a rest when it comes to merger talk. Speaking with Bloomberg, Marchionne says he will focus on growing FCA through 2018. After 2018, Marchionne could retire from the company. Last year, Marchionne campaigned publicly for a merger of FCA and General Motors. GM's board looked at his proposal in the summer and rejected it. After this, Marchionne backtracked somewhat, saying the merger could generate $30 billion a year in cash. But now, Marchionne says any chances of a possible GM merge are done. “I met Mary Barra less than a month ago in Washington. I don’t think I will have another coffee with her. It won’t happen again in the future.” Of course, the talk of merging with GM must have brought some other companies out of the woodwork? Marchionne explained that he did get proposals, but were deemed not very attractive. He still believes a big merger is possible, but "it will be someone else's duty." Now with the merger stuff mostly out of his system, Marchionne will focus on finishing the current five-year plan for the company. His overall goal is to increase global deliveries to seven million units a year by 2018. To achieve this, FCA will invest around $52 billion for new products. Source: Bloomberg
  5. If there is one thing that we can pull from this latest round of contract negotiations between the Detroit three and the UAW is that amount of car production that will be heading to Mexico. According to a report from Automotive News, Ford and Fiat Chrysler Automobile will have moved production of most of their mass-market vehicles from the U.S. to Mexico. General Motors will be the only Detroit automaker who is keeping some sort of production of their compact and midsize cars. Why the shift to Mexico? It comes down to what vehicles make money for the three automakers. Currently, pickups and SUVs carry a much higher profit margin than cars. "You can afford to pay a little more when you're making trucks, but the structural change in the industry has been so huge that I was kind of surprised by that -- trucks here and cars in Mexico," said Dave Cole, chairman emeritus of the Center for Automotive Research. But some point out this change in production could put the Detroit three in a situation they found themselves back in the early 2000's with sales of SUVs dropping due to the increase in gas prices. Models that will be moving to Mexico include the Chrysler 200, Dodge Dart, and Ford Fusion. Source: Automotive News (Subscription Required)
  6. It is now official; the UAW and FCA have a new contract. This morning the UAW announced the 77 percent of its members at FCA approved a new four-year labor contract. This comes three weeks after a majority of UAW workers voted down the first agreement reached by the two parties. “The recent bargaining process that took place on behalf of our members at FCA is a testament to the UAW’s democratic values and commitment to our members. The resolve of our membership and the dedication of our negotiating team has produced an agreement that affords UAW members a strong wage package and job security while still allowing the company to competitively produce high quality vehicles for our customers," said UAW President Dennis Williams in a statement. So what does the new contract entail? According to the Detroit News, the new contact features a plan to end the two-tier wage program, a larger signing bonus, and cutting the proposed health care co-op. "I think this contract was presented much more clearly. It included larger raises for the people who were considered tier two before and are now called 'in progression workers,' and it was much more clear about what changes were being made to health care," said Kristin Dziczek, director of the labor and industry group for the Center for Automotive Research in Ann Arbor. So with FCA all done, the UAW turns its attention to the next automaker. Who is that lucky automaker? According to Automotive News, that happens to be General Motors Source: Detroit News, Detroit Free Press, Automotive News (Subscription Required)
  7. Last night was a tense time for Fiat Chrysler Automobiles as the clock was ticking to a 11:59 PM deadline before the contract extension for 40,000 UAW workers would end. But FCA and the UAW announced this morning they have reached another tentative agreement. The deal now heads to members to be voted on. “We heard from our members, and went back to FCA to strengthen their contract. We’ve reached a proposed tentative agreement that I believe addresses our members’ principal concerns about their jobs and their futures. We have made real gains and I look forward to a full discussion of the terms with our membership,” said UAW President Dennis Williams in a statement. Details of new contract are not being talked about at this time since members have to vote on it. But Bloomberg reports that entry-level workers - second-tier - will now have a top wage of $29 per hour. In the previous contact, second-tier workers had a wage cap of $19.50 per hour. The wage cap increase for entry-level workers addresses was one of main reasons why the first proposed contract for union workers was voted down. Source: The Detroit News, Bloomberg
  8. The clock is ticking now as the UAW has issued a strike notice to Fiat Chrysler Automobiles that will end a previously agreed upon contract extension tomorrow at 11:59 PM EDT if a new deal for its 40,000 members isn't reached. FCA issued a statement saying they have received the notice and are continuing discussions with the UAW to possibly alleviate this situation. The Detroit Fress Press has learned from sources that negotiations between the two groups have broken down and that the UAW negotiators have left the bargaining table. A number of union members have been wanting a strike since the two groups went into negotiations. How serious is the UAW with the strike. An unnamed UAW official says elected leaders are being asked to pick up picket signs and are meeting with plant officials on keeping machinery running for safety reasons. What's unclear at this moment is the UAW's plan for the strike? Would it be national strike or would the Union target certain plants? “They don’t have to go long if they do strike. A strike causes pain on both sides and applies pressure to get back to the table,” said Kristin Dziczek, director of the Labor & Industry Group at the Center for Automotive Research Source: Automotive News (Subscription Required), Detroit Free Press, The Detroit News, Fiat Chrysler Automobiles FCA US Statement Regarding UAW Strike Notification FCA US confirms that it has received strike notification from the UAW. The Company continues to work with the UAW in a constructive manner to reach a new agreement. The UAW Strike Notice is Below
  9. The United Auto Workers has announced today in a statement that 65 percent of members at Fiat Chrysler Automobiles has rejected the proposed contract that was reached by the two parties last month. “As I said at the press conference: ‘What I love about our organization most of all is that no matter what we do, what action we take, the ultimate decision and the power of the union is our members and they make the final decision,’” said UAW President Dennis Williams. “That is the design of our constitution and who we are ... We don’t consider this a setback; we consider the membership vote a part of the process we respect.” The UAW will be meeting with national bargaining committee and FCA council to discuss the issues that caused the rejection and figure out the next move. There are three options on the table that the UAW can choose from: go back to the negotiation table with FCA, move on to Ford and GM, or issue a strike. FCA said in a statement it was disappointed in the result in the vote. Source: Automotive News (Subscription Required), The Detroit News, United Auto Workers, Fiat Chrysler Automobiles Press Release is on Page 2 “As I said at the press conference: “What I love about our organization most of all is that no matter what we do, what action we take, the ultimate decision and the power of the union is our members and they make the final decision.” That is the design of our constitution and who we are. We will gather the issues together; notify FCA that further discussions are needed. We don’t consider this a setback; we consider the membership vote a part of the process we respect. We will be meeting with the UAW-FCA National bargaining committee and council to discuss the issues.” Statement Regarding UAW Ratification Vote FCA US is disappointed that UAW members voted not to ratify the tentative agreement. The bargaining teams on both sides worked hard, for many days and nights, to craft a transformational agreement that would adequately reward the commitment of our workforce while ensuring the Company’s continued success and competitiveness. Striking the right balance in these two objectives has been the most difficult thing to accomplish in these negotiations, but after many hours of dialogue and debate between the UAW and FCA US leadership, the Company felt that a just and equitable compromise had been reached. The memories of our near-death experience in 2009 are vivid to this day in the minds of most of us at FCA. A large number of new employees have been brought into the Group since then who, thankfully, did not have to endure the pain and sacrifices that were required of the workforce then. But it is that knowledge and those memories that continuously reinforce the FCA leadership’s resolve to never let those events repeat. While significant progress has been made since the events of less than seven years ago, much more work remains to be done and challenges remain while new, significant ones surface. The cyclical nature of the automotive business demands that while we must recognize the need for rewarding employees during times of prosperity, we must also protect against the inevitable market downturn. This agreement accomplished both of these objectives. The tentative agreement was designed to yield a strong and competitive FCA US, thus providing stability for our workforce and opportunity for future growth and investment in an increasingly complex global marketplace. The Company will make decisions, as always, based on achieving our industrial objectives, and looks forward to continuing a dialogue with the UAW.
  10. More details about the tentative labor agreement between the UAW and Fiat Chrysler Automobiles (FCA) is coming to light. Automotive News has learned from sources that more production moving would be taking place. As we reported last week, FCA's Toledo factory would be saying good-bye to the Cherokee to make room for more Wranglers and the possibility of a new truck. The Cherokee is expected to be built Belvidere Assembly in Illinois. The big change in production is the Ram 1500 moving from the Warren Truck Plant to the Sterling Heights Assembly plant. This will mean production of Chrysler 200, currently built in Sterling Heights, will move to another plant. According to a source, that plant will be the Toluca, Mexico one. This is the current home of the Dodge Journey and North American version of the Fiat 500. Along with the 200, the Dodge Dart will move to Toluca. So what is happening with the Warren Truck Plant? That will be retooled and converted from a body-on frame to a unibody production facility to make way for the Jeep Grand Wagoneer, the rumored three-row luxury SUV. Source: Automotive News (Subscription Required)
  11. Last night, the United Auto Workers (UAW) and Fiat Chrysler Automobiles (FCA) announced they had reached a tentative agreement. This comes a couple days after the UAW announced FCA would be the lead target for contract negotiations. Details of the new contract are still under wraps as the UAW's executive board need to vet it and members to vote on it. But during a press conference last night, a couple of key details of the new contract did emerge. FCA CEO Sergio Marchionne said the two-tier wage system - an item that many UAW members wanted to be addressed in this go around - will be going away in due time. "The team has crafted together a very thoughtful process, where the issue will go away, go away over time," said Marchionne. One other key part of the contract talks was reducing health care costs. UAW President Dennis Williams has said previously of setting up a co-op where the UAW members of the three automakers are pooled together to give them some clout when dealing with health care providers. Marchionne says he likes this idea, but it remains to be seen whether Ford and GM also like this idea. Source: Automotive News (Subscription Required), Detroit News, Detroit Free Press
  12. he National Highway Traffic Safety Administration (NHTSA) and Fiat Chrysler Automobiles (FCA) have entered a consent agreement that will see FCA paying a record $105 million civil penalty after the Government investigated 23 different recalls into the company since 2009. “Today’s action holds Fiat Chrysler accountable for its past failures, pushes them to get unsafe vehicles repaired or off the roads and takes concrete steps to keep Americans safer going forward. This civil penalty puts manufacturers on notice that the department will act when they do not take their obligations to repair safety defects seriously,” said Transportation Secretary Anthony Foxx. As part of the consent agreement, FCA admitted that it "failed to timely provide an effective remedy” in three recall campaigns, and that it failed to comply with “various reporting requirements” of U.S. laws governing recalls in a timely manner. The $105 million civil penalty is made up of a $70 million payment to NHTSA, $20 million to revamping their efforts in terms of safety, and $15 million in additional penalties if FCA doesn't meet the terms. Along with the penalty, FCA will also have to buy back more than 500,000 vehicles - mostly Ram trucks - due to defective suspension parts that could cause drivers to lose control. Also, owners of Jeep Grand Cherokee and Liberty SUVs with rear-mounted gas tanks will be able to trade their vehicles for above-market value or take a take a “financial incentive” to have a trailer hitch installed. The final part of the agreement will see FCA bring in a independent monitor that will monitor issues at the company for the next three years. "We are intent on rebuilding our relationship with NHTSA and we embrace the role of public safety advocate. Accordingly, FCA US has agreed to address certain industry objectives, such as identifying best practices for recall execution and researching obstacles that discourage consumers from responding to recall notices," FCA said in a statement. Source: The Detroit News, Fiat Chrysler Automobiles Press Release is on Page 2 FCA US Reaches Consensual Resolution of NHTSA Investigation on 23 Recall Campaigns July 26, 2015 , London, UK - FCA US LLC (FCA US) today announced it has entered into a consent order with the National Highway Traffic Safety Administration (NHTSA) which resolves the issues raised by NHTSA with respect to FCA US’s execution of 23 recall campaigns in NHTSA’s Special Order issued to FCA US on May 22, 2015 and further addressed at a NHTSA public hearing held on July 2, 2015. The consent order includes an admission by FCA US that in three specified campaigns it had failed to timely provide an effective remedy, and that it did not timely comply with various reporting requirements under the National Traffic and Motor Vehicle Safety Act of 1966. Pursuant to the consent order, FCA US has agreed to make a $70 million cash payment to NHTSA and to spend $20 million on industry and consumer outreach activities and incentives to enhance certain recall and service campaign completion rates. An additional $15 million payment will be payable by FCA US if it fails to comply with certain terms of the consent order. FCA US has also agreed to undertake specific actions to improve its recall execution. The consent order will be supervised by an independent monitor and will remain in place for three years subject to NHTSA’s right to extend for an additional year in the event of FCA US' noncompliance with the consent order. FCA US LLC Consent Order Response July 26, 2015 , Auburn Hills, Mich. - FCA US LLC acknowledges the admissions in its Consent Order with the National Highway Traffic Safety Administration. We also accept the resulting consequences with renewed resolve to improve our handling of recalls and re-establish the trust our customers place in us. We are intent on rebuilding our relationship with NHTSA and we embrace the role of public safety advocate. Accordingly, FCA US has agreed to address certain industry objectives, such as identifying best practices for recall execution and researching obstacles that discourage consumers from responding to recall notices.
  13. Sergio Marchionne isn't taking no for answer from General Motors over merging with FCA. Reuters reports the automakers have brought investment banks for help to deal with this mess. Sources say FCA has brought in UBS, while GM has brought in Goldman Sachs and possibly Morgan Stanley. In the case of GM, the company has signed a letter of engagement with Goldman Sachs on advice with dealing with FCA. "It would be inconceivable for General Motors not to be talking to any number of advisers about normal business operations, but I'm not going to list the issues one by one," said GM Senior Vice President Tony Cervone. Cervone didn't confirm if GM had brought in Goldman Sachs or Morgan Stanley. FCA, Goldman Sachs, and Morgan Stanley declined to comment. Does it mean that a FCA and GM merger is possible? Not at this time. But as Bernstein analyst Max Warburton said "Stranger things have happened, especially in bubbly equity markets." Source: Reuters
  14. FCA CEO Sergio Marchionne is quite serious on this consolidation of the automotive industry. Last month, it was reported that Marchionne emailed General Motors CEO Mary Barra about a possible tie up and wanting to meet back in March. Barra rejected this idea outright. But this isn't stopping Marchionne. The Wall Street Journal reports Marchionne is turning to activist investors to compel GM into this idea. There is prescient for this idea as earlier in the year, a group of investors approached GM to buy back $8 billion of their stock. Through negotiation, GM agreed to buy back $5 billion of stock. The other prescient goes back to 2006 when Nissan CEO Carlos Ghosn teamed up with activist investor Kirk Kerkorian to have GM join the alliance with Nissan and Renault. After weeks of discussion, GM declined to join. If this idea goes no where, Marchionne has a Plan B. Bloomberg has learned from sources that there is a fallback option where Marchionne could talk to other automakers. Such automakers include Volkswagen, Mazda, and PSA Peugeot-Citroen. Source: The Wall Street Journal (Subscription Required), Bloomberg
  15. Next month, the National Highway Traffic Safety Administration (NHTSA) will be holding a public hearing to probe Fiat Chrysler Automobiles' handling of 20 different recalls covering 11 million vehicles since 2013. The agency is concerned about the completion rates and other issues on these recalls. But FCA believes this hearing should be skipped. In a 19-page response to questions from NHTSA that was released yesterday, the company argues that its overall recall completion rate is "nearly the best in the industry, with 77 percent. The response goes onto state that they are compliant with existing regulations and are in the process of implementing new programs to improve their completion rate. FCA says their way “to review and identify with NHTSA input, and implement changes based on the learnings obviate the need for a hearing.” But NHTSA administrator Mark Rosekind tells The Detroit News that the hearing is still on. “Twenty recalls are a problem — 10 million vehicles. There’s a pattern here of things we’re concerned about. And they weren’t just little things — they were big things including major safety issues related to fire, door latches that could open up when people were driving. It’s not just, ‘Oh, they were late on something.’ If they didn’t start, it was late, it means all that time people are at risk. And they told us something different,” said Rosekind. Source: The Detroit News
  16. What is going on Fiat Chrysler Automobiles? Reuters reports that a number of new and redesigned vehicles have been pushed back as the company searches for a new partner. The delays allow FCA to save billions of dollars in investment. Suppliers who have seen say at least 12 future vehicle programs from Chrysler, Dodge, Jeep, Maserati, and Ram have been delayed. Two of those vehicles, the next Jeep Wrangler and Ram 1500 are reportedly moving to dates later in 2017. Suppliers say there are a number of reasons as to the delays such as last-minute design and engineering changes - some of which are helping save a fair amount of cash. FCA declined to comment on the delays, but did say the plans outlined in their latest five-year plan "need to be flexible and fluid, with the potential to add some vehicles, pull some forward and extend the life cycle of others. We look at these programs on a vehicle-by-vehicle basis." While FCA is delaying a number of vehicles, they are also moving some up. Suppliers tell Reuters that Alfa Romeo may be getting more models on a quicker basis. Source: Reuters
  17. Fiat Chrysler Automobiles is making some major changes in how they report sales and has admitted that their 75-month streak was only 40 months and it ended in September 2013. The new sales reporting methodology announced by FCA in a statement will comprise of, Sales reported by dealers Fleet sales delivered directly by the company Retail 'other' sales, including those by dealers in Puerto Rico Using this new methodology, FCA went back and reviewed past monthly reports and found a 3 percent decrease in sales in September 2013 - a month that it had reported a 1 percent increase. Likewise, in August 2015, sales would have dropped 1 percent - not an increase of 2 percent. FCA says its “annual sales volumes under the new methodology for each year in the 2011-16 period are within approximately 0.7 percent of the annual unit sales volumes previously reported.” "Recent press reports have raised questions about the manner in which FCA US reports vehicle unit sales data on a monthly basis. These reports have mistakenly suggested that potential inaccuracies in the monthly data somehow impact the integrity of FCA's reported revenues in its financial statements," FCA said in a statement. This implies that there isn't a connection between monthly retail sales reporting and revenue disclosures, something the company is being investigated for by the Department of Justice and Securities and Exchange Commission. FCA went on to say that individual dealers were to blame for inflating sales and then 'unwinding' the transaction the following month. The company says there isn't any economic incentive for a dealer to do this as any incentives are reversed once the sale is unwound. Source: Automotive News (Subscription Required), Fiat Chrysler Automobiles Press Release is on Page 2 FCA US LLC EXPLANATORY NOTE ON SALES REPORTING PROCESS July 26, 2016 , Auburn Hills, Mich. - Recent press reports have raised questions about the manner in which FCA US reports vehicle unit sales data on a monthly basis. These reports have mistakenly suggested that potential inaccuracies in the monthly data somehow impact the integrity of FCA’s reported revenues in its financial statements. This note is intended to explain how FCA US’s monthly sales reporting process has worked, recognizing the limitations inherent in a process that collects sales data entered by some 2,600 dealers until midnight of the last reporting day of a month and releases the aggregate data typically within 8 hours of the final data entries. FCA US believes that its current process has been in place in more or less the same form for more than 30 years, with reporting previously being made every 10 days and eventually evolving into monthly cycles. The vehicle unit sales data reported by FCA US is comprised of three main components: (a) sales made by dealers to retail customers; (b) sales of vehicles shipped directly by FCA US to fleet customers and © other retail sales including sales by dealers in Puerto Rico, limited deliveries through distributors and a small number of vehicles delivered to FCA employees and retirees and vehicles used for marketing. Dealer Sales Retail sales data is collected from the dealers (through a reporting system called the New Vehicle Delivery Report, or NVDR). This system is primarily designed to capture the time of a retail sale for two purposes. First, the date of sale recorded in the NVDR system begins the retail customer’s warranty coverage on the vehicle. Second, the recording of the retail sale in the NVDR system triggers FCA US’s obligation to make any manufacturer’s incentive payments to the dealer. These incentives may be based on the particular model sold, the number of certain models sold in the period and the achievement of certain overall dealer volume objectives. These retail sales are made by dealers out of their own inventory of vehicles. This inventory was purchased by the dealers from FCA US before any retail delivery to the customer. Consistent with other automakers’ practices, it is this initial sale -- by FCA US to the dealer -- that triggers revenue recognition in FCA US, and not the ultimate sale of the vehicle by a dealer to a retail customer. It is for this reason that the process of reporting monthly retail unit sales has no impact on the revenue reported by FCA in its financial statements. It is possible for a dealer to “unwind” a transaction recorded in the NVDR system and return the vehicle to the dealer’s unsold inventory. This “unwind” results in the return by the dealer of any incentives paid by FCA US to the dealer for the sale and it cancels the beginning of the warranty period. These unwinds may, and in fact do, occur for a number of reasons including: inability of the retail customer to finalize financing for the purchase or a change in customer preferences, among others. It is admittedly also possible that a dealer may register the sale in an effort to meet a volume objective (without a specific customer supporting the transaction). There is, however, no obvious economic incentive for a dealer to do so, since FCA US’s policy is to reverse all incentives due or paid to a dealer that resulted from the unwound retail sales transaction. When reporting monthly retail sales in the morning of the first day of the following month, a manufacturer cannot know which, if any, transactions may be unwound after the data is released. Because FCA US believes that most unwinds are recorded shortly following the time the initial sale is registered in the NVDR system, FCA US has not historically reflected either unwinds or the subsequent sales of these vehicles in its sales reporting. As a safeguard against double reporting, however, FCA US blocks the vehicle identification number (VIN) in its NVDR files to ensure that a subsequent retail sale of the vehicle does not enter into any tally of reported sales in any future month (i.e. a vehicle cannot be counted twice as a retail sale by the dealer). Fleet and Other Retail Sales The other component of the monthly reported unit sales has been vehicles that FCA US delivers directly, principally to fleet accounts, and retail and other sales consisting of limited deliveries through distributors and a small number of vehicles for company and marketing uses. Sales by dealers in Puerto Rico have also been included in other retail sales. It has been a matter of historical practice (going back many years before 2009 bankruptcy) for FCA US and its predecessors to maintain a “reserve” of vehicles in this category that had been shipped but not been reported as “sold” in the monthly sales reports. While the origin of this practice is unclear and is being looked into, FCA US believes that it was probably originally designed to exclude from the reported sales number vehicles that were in transit to fleet customers, as well as vehicles that were not yet deployed in the field (because, for example, they were being tailored by the fleet customer or a third party to the fleet customer’s specifications). The rationale for this exclusion, we believe, was to introduce some level of conformity in the reported monthly numbers, since the sales data was intended to reflect vehicles put in use during the month. This “not-in-use reserve” has ranged in size from month to month, and resulted from a subjective assessment at month-end. A review of the data suggests that the reserve has always been positive, such that FCA US has always, in the aggregate, reported fewer sales than the aggregate number of shipped units on a running basis. Nevertheless, there appears to be no objective methodology for establishing and maintaining such a reserve and thus several plausible values exist for such a reserve. To the extent that the methodology historically used does not yield a unique value, the outcome is inherently arbitrary. Our Evaluation of Past Practices and a Way Forward Our review of industry practice has not revealed a standard reporting practice among OEMs in the U.S., although we believe that FCA US’s competitors have used broadly similar approaches in compiling monthly sales data. The complexity of this compilation task is unique to the U.S. In Europe, for example, automakers generally report data generated by the national vehicle registration offices on the basis of the number of vehicles licensed by government agencies in a given month. The data is thus verified by a third party and is not subject to interpretation by the automakers. Due to the nature of the U.S. registration system involving 50 states with diverse recording and reporting practices, applying a registration-based system in the U.S. has never been thought to be feasible. FCA US has seriously considered simply ceasing to report this sales data on a monthly basis, and to rely only on published quarterly financial statements as a gauge of improvement or deterioration in our U.S. activities. We understand the sales data are used by some market followers, the automotive press in particular, to opine about the state of the industry and we accept that our decision to suspend monthly reporting would impact those constituencies and possibly may impair their perception, and in turn the public perception, of FCA US. FCA US has therefore decided to continue monthly sales reporting with a revised methodology. Total sales will be comprised of Dealer reported sales in the U.S.; Fleet sales delivered directly by FCA US; and Retail other sales including sales by dealers in Puerto Rico. [*]Dealer reported sales (derived from the NVDR system) will be the sum of All sales recorded by dealers during that month net of all unwound transactions recorded to the end of that month (whether the original sale was recorded in the current month or any prior month); plus All sales of vehicles during that month attributable to past unwinds that had previously been reversed in determining monthly sales (in the current or prior months). [*]Fleet sales will be recorded as sales upon shipment by FCA US of the vehicle to the customer or end user. [*]Other retail sales will either be recorded when the sale is recorded in the NVDR system (for sales by dealers in Puerto Rico and limited sales made through distributors that submit NVDRs) or upon receipt of a similar delivery notification (for vehicles for which NVDRs are not entered such as vehicles for FCA executives and employees). The objective of this new methodology is to provide in FCA US’s judgment the best available estimate of the number of FCA US vehicles sold to end users through the end of a particular month applying a consistent and transparent methodology. It continues to include some level of estimation in respect of, for example, unwound transactions that straddle a month end and fleet deliveries, which may be placed into service at various times after shipment and delivery. FCA US believes, however, that the consistency in application and transparency of this new methodology provides the most appropriate data for the limited uses to which the monthly vehicle unit sales data should be applied. FCA US has prepared unit sales reports going back to the beginning of 2011 using this approach, and has included the results in the attached Exhibit. The Exhibit also compares the data derived under this new methodology with previously reported US monthly sales data. This comparison yields the following results. 1. FCA US in March of this year last commented specifically about a “streak” of year-over-year monthly sales improvements since April of 2010. Applying this new methodology, during the periods presented below, year-over-year monthly sales would have declined in September 2013 (-3%), August 2015 (-1%) and May 2016 (-7%). The so called “sales streak” would have stopped in September 2013 (after 40 months) and would have had three additional periods of sequential year-over-year improvements of 22, 8, and 1 month(s). 2. Annual sales volumes under the new methodology for each year in the 2011-2016 period are within approximately 0.7% of the annual unit sales volumes previously reported. 3. The monthly adjustments to previously reported sales as a result of the adjustment to deduct sales later unwound and add back sales attributable to previously unwound sales over the period January 1, 2011 to June 30, 2016 are a mix of positive and negative numbers which did not exceed 0.5% of the reported data in any month. The maximum numerical reduction from previously reported data was 770 units (0.5% of the month’s volume) in May 2015 and the maximum numerical addition to previously reported data was 437 units (0.4%) in September 2014. The total over the 2011 to 2016 period representing unwound transactions previously reported as sold for which vehicles remain in dealer stock at June 30, 2016, is approximately 4,500 vehicles, or 0.06% of the total volume reported over the period (7.7 million cars). FCA US will report its July 2016 sales using the new methodology.
  18. Following the news last week that Fiat Chrysler Automobiles was under investigation by both the Department of Justice and Securities and Exchange Commission over inflated sales, Automotive News has learned from various sources that an investigation done by the company revealed misreported sales numbers. According to the sources, FCA ordered an internal review last year over their sales reporting. What the review found is "that 5,000 to 6,000 vehicles had been reported as sold by dealers and then "unwound." It is unknown the time period that was covered by the review. After the review, U.S. sales head Reid Bigland attempted to put a stop to the practice. But a source said the overstating of sales has been creeping back in this year due to increased competitive pressures on FCA's field staff. Another source says this increased pressure is causing the turnover rate of FCA's sales staff to be four times higher than the rest of the company. But why inflate the numbers in the first place? According to the sources, the inflation was to help preserve FCA's of U.S. monthly year-over-year sales increases (which currently stands at 75 months). This run is the longest streak of any automaker and has been a source of pride for them. But interestingly, Automotive News notes that FCA stopped mentioning this fact on its March sales release. This is also the same time they added this disclaimer, "FCA US reported vehicle sales represent sales of its vehicles to retail and fleet customers, as well as limited deliveries of vehicles to its officers, directors, employees and retirees. Sales from dealers to customers are reported to FCA US by dealers as sales are made on an ongoing basis through a new vehicle delivery reporting system that then compiles the reported data as of the end of each month." "Sales through dealers do not necessarily correspond to reported revenues, which are based on the sale and delivery of vehicles to the dealers. In certain limited circumstances where sales are made directly by FCA US, such sales are reported through its management reporting system." FCA declined to comment. Source: Automotive News (Subscription Required)
  19. Fiat Chrysler Automobiles is considering whether or not to do a large SUV. This model would take on the likes of the Chevrolet Tahoe/GMC Yukon and Ford Expedition. Large SUVs are also big money makers. According to analysts, GM makes $10,000 or more on their large SUVs. "While crossovers are all anyone wants to talk about, the money is still in pickups and SUVs. FCA needs to enter this segment. FCA is chasing profit-driving vehicles and they are missing out on a major one, just as Ford is getting ready to launch an all-aluminum Expedition," said Dave Sullivan, an automotive analyst for Auto Pacific to the Detroit Free Press. Mike Manley, head of Jeep and Ram brands told the paper last month they are putting some thought into doing a large SUV. This possible new model might use the platform for the next-generation Ram truck - due out in 2018. "You have the opportunity with a new frame for the next-generation Ram. You have the opportunity to take a large SUV off of it because we already have a very, very capable frame today that is going to be upgraded," said Manley. One item Manley made very clear was this new SUV wouldn't be wearing a Ram badge. If FCA was to go forward with this, it would be part of the Chrysler, Dodge, or Jeep. Source: Detroit Free Press
  20. Fiat Chrysler Automobiles is facing an investigation by the U.S. Department of Justice and Securities and Exchange Commission over their sales reporting practices. Bloomberg learned about the investigation from two sources this morning and since then, FCA has confirmed it. This investigation stems from lawsuits filed earlier this year by dealers in Florida and Illinois saying the automaker inflated sales numbers by having them file false 'New Vehicle Delivery Reports'. At the time, FCA denied the charges made and is seeking dismissal of the suit. But as Automotive News notes, FCA added a disclaimer to their sales reports in April about how sales are reported. “FCA US reported vehicle sales represent sales of its vehicles to retail and fleet customers, as well as limited deliveries of vehicles to its officers, directors, employees and retirees. Sales from dealers to customers are reported to FCA US by dealers as sales are made on an ongoing basis through a new vehicle delivery reporting system that then compiles the reported data as of the end of each month. Sales through dealers do not necessarily correspond to reported revenues, which are based on the sale and delivery of vehicles to the dealers. In certain limited circumstances where sales are made directly by FCA US, such sales are reported through its management reporting system.” Investigators from the FBI and SEC visited various FCA field staff at their homes and offices on July 11th. That same day saw federal attorneys visit FCA's headquarters to gather information. According to a source, FCA employees were advised not to speak with investigators without counsel. In a statement today, FCA said that it would "cooperate fully" with the SEC investigation into its "reporting of vehicle unit sales to end customers" in the U.S. It also mentioned that is has received similar inquiries from the DOJ and will cooperate with them. The DOJ, FBI, and SEC declined to comment. Source: Bloomberg, Automotive News (Subscription Required)
  21. Sergio Marchionne is the biggest critic of electric vehicles in the automotive industry. But he seems to be changing his tune (to a point). "I’m not as convinced as some others are about the fact that electrification is the solution for all of man’s ills. We need to experiment as we are doing now with connected cars and mobility as electrification is one of the potential answers," said Marchionne to Bloomberg. Marchionne said the company is contemplating adding full electric vehicles to their lineup including a small city car for Europe and a version of the upcoming Maserati Alfieri coupe. The latter model could be positioned as a rival to Tesla. "I’ve always thought the economic model that supports Tesla is something that Fiat Chrysler could replicate as we have the brand and the vehicles to do it. I think that to use one of our potential cars as an experiment in this area is interesting," said Marchionne. Marchionne also said the company would launch more hybrid vehicles down the road. Source: Bloomberg
  22. Fiat Chrysler Automobiles surprised everyone last month when they announced a partnership with Google concerning autonomous vehicles. It seems that FCA wants to do something similar with another company. Bloomberg has learned from sources that FCA is currently in talks with Uber Technologies to strike a similar partnership concerning autonomous vehicles. At the moment, the talks between the two companies are at the preliminary stage. Unsurprisingly, both FCA and Uber declined to comment. Another source tells Bloomberg that Uber is in talks with other automakers. Not a big surprise as Uber already has announced a partnership with Toyota concerning the ride-service section of the business. Why would FCA be talking with Uber? FCA doesn't have the money/resources to develop their own technology. By partnering with various technology, this allows FCA to catch up in terms of autonomous tech. Source: Bloomberg
  23. Fiat Chrysler Automobiles currently finds itself in hot water with the German transport ministry (KBA) for missing a meeting last week to talk about the use of software that turns off emission controls. Then word came out from the KBA that FCA declined to cooperate with the investigation, saying their vehicles meet emission standards. Because of that move, the KBA is considering banning the sale of FCA vehicles. Reuters cites a report from German newspaper Bild am Sonntag where sources said the KBA could threaten the company with a sales ban if they don't comply with emission rules. Not good news since the country is FCA's second biggest European market. How did FCA end up here? Bild am Sonntag explains that the KBA found evidence of the exhaust treatment system turning off after 22 minutes in some of FCA's models. A regular emission test takes about 20 minutes. After this news came out, shares in FCA dropped five percent in European stock trading. What happens next? Italian regulators and the European Commission will look at the data from the KBA before deciding the next move. FCA isn't the only automaker currently in hot water with the KBA. Last week, Opel met with officials to discuss software that turns off emission controls in the Zafira. Source: Reuters
  24. For better or worse, Fiat Chrysler Automobiles CEO Sergio Marchionne will say whatever comes to his mind. Case in point, saying the next-generation Chrysler 300 could go front-wheel drive. "This plant and this architecture is capable of making the 300 successor, the front-wheel, all-wheel drive successor," Marchionne told reporters at FCA's Windsor plant - home to Pacifica production. The architecture in question what underpins the new Pacifica minivan. Now when asked if the 300 would switch from a rear-wheel to a front-wheel platform, Marchionne said, "It's capable. It's not a commitment." The current Chrysler 300 and its stablemates, the Dodge Charger and Challenger use the LX platform that uses suspension bits from older Mercedes-Benz models - the W211 E-Class and W220 S-Class. This move makes some sense as Chrysler is slowly being positioned as a competitor to the likes of Honda, Chevrolet, and Ford. Plus, it would give Dodge some breathing room to become the performance brand by having a rear-wheel drive platform for themselves. But who can be sure at the moment since plans at FCA seem to be in a constant state of change. Source: Reuters Pic Credit: William Maley for Cheers & Gears
  25. Last month, Fiat Chrysler Automobiles announced a $75 million investment into their Trenton Engine Complex to build a new four-cylinder engine. Automotive News has learned some details about this new engine and where it could end up. According to a source, the new four-cylinder is codenamed Hurricane and it will be a turbocharged 2.0L. The engine will feature direct-injection and a twin-scroll turbocharger. Hurricane is expected to produce almost 300 horsepower. This seems like a perfect engine to drop into a hot version of a compact model, but Automotive News says this engine will likely appear in the next-generation Wrangler. FCA CEO Sergio Marchionne has hinted the Wrangler would have the option of a four-cylinder paired with a new eight-speed automatic. This would likely improve the current Wrangler's fuel economy of 17 City/21 Highway with the current 3.6L V6 and five-speed automatic. Source: Automotive News (Subscription Required) Pic Credit: William Maley for Cheers & Gears

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