Jeep Baby Has Italian Accent in Fiat-Chrysler Merger Test
Take a petite Italian Fiat 500, add some American off-road ruggedness and you get the Jeep Renegade, the street-ready symbol of Fiat Chrysler Automobiles NV.
The compact sport-utility vehicle, which debuted today at the Geneva International Motor Show, will serve as a critical test for the carmaker being formed from the merger of Fiat SpA (F) and Jeep parent Chrysler. The American brand’s new entry-level model will be made in Italy and share underpinnings with the 500X, a crossover version of the trendy Fiat city car.
“The Renegade and 500X are perfect examples of something Fiat and Chrysler couldn’t have done alone,” said Roberto Verganti, a management professor at Milan Polytechnic and the author of the 2009 book “Design-Driven Innovation.” “They are exploiting Fiat expertise in small cars to timely launch a Jeep model in a segment that’s actually booming.”
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Chief Executive Officer Sergio Marchionne completed a decade-long search for a partner with Fiat’s January purchase of the remaining shares in the U.S. carmaker. The transaction gave the regional manufacturers a chance to better compete with global rivals like General Motors Co. (GM) and Volkswagen AG. (VOW) His challenge now is to prove that his skills extend beyond deal-making to creating cars that customers want to buy.
The Renegade, which is about 7 inches (18 centimeters) shorter than the Patriot, will vie with Nissan Motor Co. (7201)’s Juke and Kia Motors Corp. (000270)’s Soul for the growing ranks of urban consumers looking for outdoor flair. It’s one of 146 model debuts in Geneva as carmakers step up efforts to woo customers in a European market that’s reviving after a six-year slump.
The Renegade will be assembled at Fiat’s plant in Melfi in southern Italy, making it the only Jeep to be currently built outside North America. The model will go on sale in Europe by early in the third quarter and reach the U.S. by the end of 2014, Mike Manley, head of the Jeep brand, said today in an interview at the Geneva show.
“This car really shows you a combination of resources and technology,” Manley said. Use of the Fiat car’s underpinning “helps us to get to market faster, and cut costs.”
The factory choice is part of Marchionne’s strategy to fill under-used plants in Fiat’s home country with vehicles that can be exported worldwide. The goal is to return to profit in Europe, where demand is near a two-decade low and Fiat lost 520 million euros ($710 million) in 2013. The Turin-based carmaker’s market share in western Europe dropped to 6.2 percent in 2013 from 8.1 percent in 2007 because of a lack of new models.
“The Renegade, with the 500X, can be game changers for Fiat in Europe,” said Ian Fletcher, an analyst at IHS Automotive in London. “It’s probably the first time in several years that the carmaker has managed to get the right products in the market at the right moment.”
Lifted by 121,000 deliveries of the baby Jeep, Fiat Chrysler sales are forecast to jump 20 percent to 5.2 million cars in 2016, according to IHS. With the addition of the Fiat 500X, the manufacturer will probably deliver 204,000 small SUVs in 2016, beating Nissan’s 186,000 Jukes while trailing Ford Motor Co. (F)’ EcoSport sales of 288,000 vehicles, IHS said.
The car will draw on Jeep’s off-road tradition with optional four-wheel drive and a boxy design that references the brand’s iconic Wrangler. The outdoor feel comes by way of two removable roof panels that can be stored in the trunk. Demand is likely to be roughly evenly split between the U.S., Europe and Asia, according to IHS.
The manufacturer is targeting a final agreement on building Jeeps in China by the end of the first quarter, Manley said. The brand is “on pace” to meet a goal of selling 1 million vehicles this year, he said.
“The Renegade’s a car you can sell anywhere,” said Jesse Toprak, chief analyst at U.S. auto website Cars.com. “That’s the beauty of the segment. There is universal demand for it.”
The compact marks Jeep’s first new model line since the $18,995 mid-sized Compass in 2007. It will probably be cheaper than the $15,995 Patriot to lure a broader range of buyers, even if some purists balk at the pint-sized Jeep.
“You might have a few Jeep enthusiasts say it’s not a Jeep, but Jeep has been hearing that for years with the Compass and Patriot,” said Jeff Schuster, an analyst with LMC Automotive in Troy, Michigan. “They need to bring fresh, new buyers into the brand to keep the brand moving.”
Because Jeep is globally known, the SUV maker represents a key asset for the combined company, which plans to complete the merger, including shifting its primary listing to the New York Stock Exchange, by October. With the help of cash from the once-bankrupt Chrysler, Fiat plans to invest as much as 9 billion euros to end losses in Europe by 2016, people familiar with the matter said in December.
To further shore up financing, Fiat is considering selling about 1.5 billion euros in mandatory convertible bonds, people familiar with the matter said last week. Marchionne declined today to comment on a possible sale.
“What we can do now in Italy is much more than what we could have done” before the Chrysler deal, Chairman John Elkann said at an event in Sondrio in northern Italy on Feb. 14. “We will build a Jeep in Italy to be sold all over the world.”