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EV cost burden pushing automakers to their limits, says Stellantis' CEO Tavares

DETROIT — Stellantis CEO Carlos Tavares said external pressure on automakers to quickly shift to electric vehicles potentially threatens jobs and vehicle quality as producers struggle with EVs' higher costs. Governments and investors want car manufacturers to speed up the transition to electric vehicles, but the costs are "beyond the limits" of what the auto industry can sustain, Tavares said in an interview at the Reuters Next conference released Wednesday. "What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle," he said. "There is no way we can transfer 50% of additional costs to the final consumer because most parts of the middle class will not be able to pay." Automakers could charge higher prices and sell fewer cars, or accept lower profit margins, Tavares said. Those paths both lead to cutbacks. Union leaders in Europe and North America have warned tens of thousands of jobs could be lost. Automakers need time for testing and ensuring that new technology will work, Tavares said. Pushing to speed that process up "is just going to be counter productive. It will lead to quality problems. It will lead to all sorts of problems," he said. Tavares said Stellantis is aiming to avoid cuts by boosting productivity at a pace far faster than industry norm. "Over the next five years we have to digest 10% productivity a year ... in an industry which is used to delivering 2 to 3% productivity" improvement, he said. "The future will tell us who is going to be able to digest this, and who will fail," Tavares said. "We are putting the industry on the limits." Electric vehicle costs are expected to fall, and analysts project that battery electric vehicles and combustion vehicles could reach cost parity during the second half of this decade. Like other automakers that earn profits from combustion vehicles, Stellantis is under pressure from both establishment automakers such as GM, Ford, VW and Hyundai, as well as start-ups such as Tesla and Rivian. The latter electric vehicle companies are far smaller in terms of vehicle sales and employment. But investors have given Tesla and Rivian higher market valuations than the owner of the highly profitable Jeep and Ram brands. That investor pressure is compounded by government policies aimed at cutting greenhouse gas emissions. The European Union, California and other jurisdictions have set goals to end sales of combustion vehicles by 2035.

The mad genius of killing the Dodge Dart and Chrysler 200

Sergio Marchionne isn't crazy. At least not with respect to the recent announcement that Fiat Chrysler Automobiles will cease production of the Dodge Dart and Chrysler 200. Instead of crazy I'd call this CEO ruthlessly pragmatic, and perhaps short-sighted. The latest revisions to FCA's most recent five-year plan tell some truths about the company's finances. In other words, it can't afford to build mainstream sedans. With only 87,392 units sold in 2015, the Dart is an also-ran in the segment. The axe falls easily there - Chrysler hasn't had a compact-car hit since the second-generation Neon. The 200 isn't so cut and dried: Last year sales increased 52 percent, and the 177,889 total for 2015 is more than those for the Subaru Legacy and Kia Optima. But looking at the overall FCA picture the Chrysler 200 has to go, at least from a short-term perspective. The vehicles that make big money – Ram trucks; Jeep's Cherokee, Grand Cherokee, and Wrangler – can't be made fast enough. FCA can't afford to idle the 200's Sterling Heights, MI, assembly plant to cut back on inventory when other plants are running flat out. It seems crazy to throw away 265,000 sales, but FCA is leaving money on the table by not building more profitable vehicles. The Wirecutter's Senior Autos Editor (and former Autoblogger) John Neff agrees. "As bold as it looks from the outside, he's really making a safe bet that their money is better spent on designing better and building more crossovers and trucks. He's probably right about that." But according to Jessica Caldwell, Executive Director of Strategic Analytics at Edmunds, "FCA's strategy of eliminating the Dart and 200 might be short-sighted if gas prices were to rise and Americans, once again, flocked to small vehicles. FCA must have plans to expand the lineup of small SUVs and position them as small-car alternatives in terms of price and fuel efficiency for this strategy to make sense." FCA's latest announcement focuses mainly on the profitable brands and nameplates. There's hardly a mention of Chrysler, Dodge, or Fiat. And future planning is where the plot holes appear. This realignment cuts dead weight from the product portfolio, but FCA's latest announcement focuses mainly on the profitable brands and nameplates. There's hardly a mention of Chrysler, Dodge, or Fiat. So what's Sergio up to? David Sullivan of AutoPacific thinks Marchionne is still looking for another CEO to hug.

Autoblog Minute: No strike, FCA and UAW reach tentative agreement

A union strike is avoided as the United Auto Workers reached a tentative agreement with FCA. Autoblog's Adam Morath reports on this edition of Autoblog Minute. Show full video transcript text [00:00:00] A union strike is avoided as the United Auto Workers reached a tentative agreement with FCA. I'm Adam Morath and this is your Autoblog Minute. The previous contract extension between the UAW and FCA expired at 11:59 pm on Wednesday, October the 7th. Had a new agreement not been reached, the UAW was set to strike at midnight. A zero hour tentative agreement was reached preventing a strike and now, [00:00:30] UAW leaders will convene for a vote on a new deal, Friday, October 9th. In a press release, the UAW said that terms of the new deal will be announced following the Friday vote. Check in with Autoblog as we continue to update reports as more details of the new labor deal come in. But in the meantime, work at FCA will go on. For Autoblog I'm Adam Morath. Autoblog Minute is a short-form video news series reporting on all things automotive. Each segment offers a quick and clear picture of what's happening in the automotive industry from the perspective of Autoblog's expert editorial staff, auto executives, and industry professionals. UAW/Unions Chrysler Fiat Autoblog Minute Videos Original Video FCA strike