Stellantis Doesn’t Deserve Jeep

What happened to the once-mighty Jeep brand? There was a column out a few days ago that makes the point that all of the problems with the Jeep brand center around a bunch of short-sighted decisions by its corporate overlords. Is that fair? In a complex world could it be so simple?

Complexity is the theme of this Tuesday’s chapter of The Morning Dump. Cars are not built in a vacuum and the hope of bringing Volkswagen’s hottest brand to more people is in peril because of various global rules. This is the same Volkswagen that said it wasn’t going to lay people off and is now, of course, considering layoffs.

Tesla is committed to robotaxis and AI and all of it, but it still has to build cars, and building cars is, you guessed it, kind of complex. In particular, it needs a new Model Y to compete in China and the company apparently doesn’t think Chinese citizens will be as forgiving as American ones in one certain area.

The Problem With Jeep Is Stellantis

The most valuable car brands in the world, ten years ago, were probably Ferrari and Jeep. Neither sold as many actual vehicles, globally, as a Volkswagen, but I’m not certain you could sell VW-branded strollers to people in Argentina or get 10,000 people who don’t own a Jetta to wear Jetta-themed hats to an F1 race.

It’s also notable that, for a time, both Jeep and Ferrari were owned by the same parent company. But before Ferrari could become Stellantis, it went public and was spun off in quite a profitable way. Ferrari has since continued to be one of the most valuable brands, car or otherwise, in the world.

Jeep stayed with the parent company and has suffered ever since. In 2018, Jeep sold 973,000 vehicles. It’s dropped every year since, hitting a low of 641,000 vehicles in 2023.

Fiat, it turns out, was initially a decent owner of Jeep. In addition to continuing to invest in the Wrangler and Grand Cherokee, Fiat introduced a bunch of lower-cost models like the reimagined and Fiat-based Jeep Cherokee (KL) and Jeep Renegade. These managed to expand the Jeep brand in a way that didn’t ruin the Wrangler image. Of course, Fiat also spent money on bringing Alfa back to the United States instead of making more new Jeep products. It also invested heavily in the new Wagoneer and Grand Wagoneer to disappointing results thus far.

I haven’t driven the newest Wrangler yet, though I’ve never driven a bad Wrangler and I think Jeep continues to have strong engineering. It’s usually not engineering that’s the problem with any automaker and that is likely true at Stellantis. The same goes for the designers. I generally think Stellantis designs, whether at Citroën or Chrysler, tend to be as good as the competition and often better.

So what’s the issue? Our buddy Mark Phelan has a big piece in the Detroit Free Press on this that’s been rattling around in my brain like a stray lug in a spare tire well. The headline is: “Jeep’s precipitous decline lies at feet of those in executive suites, mansions”

Here’s the part that I’ve been thinking about:

Fiat Chrysler’s expensive bet on reviving the Wagoneer and Grand Wagoneer models has yet to pay off. The big SUVs should do well in the long run, though.

Bottom line: Since 2019, Jeep dropped its third bestselling vehicle, let No. 4 age toward irrelevance and dropped No. 5, the Renegade.

Its 2023 U.S. sales were 31.2% down from before the pandemic.

Facing strong new competition in segments Fiat Chrysler and Stellantis either abandoned or underfunded, it’s a wonder things aren’t worse.

I feel like something is fundamentally broken and it’s a larger systemic problem that was only exacerbated by the pandemic. Most American and European automotive executives (and, to a much lesser extent, workers) earn the bulk of their money not from a salary but from bonuses tied to economic performance and share price. While there’s nothing explicitly wrong with assigning value this way, especially for a public company, the nature of carmaking does create some perverse incentives.

By strangling engineering, marketing, and other areas and putting out old platforms, Stellantis was highly profitable, especially during the pandemic. That is a short-term strategy that seems to be creating long-term problems.

I’ve talked about this before, but it’s not clear to me if this pause was a necessary one to fill the company’s war chest in preparation for an uncertain EV transition or just short-term hopeful thinking that made execs rich yet otherwise doomed the company for the future.

Did Fiat Chrysler set up Stellantis for failure? Did Stellantis exacerbate an existing problem? Is it all going to work out and are we all going to look foolish for doubting Stellantis CEO Carlos Tavares? These are complex questions and, short of a crystal ball, I don’t have a great answer.

I do agree with Mark’s ultimate conclusion, which is that “It was the executive suite, not the hourly workers, engineers, and designers, that got Jeep into this mess.”

FCA-turned-Stellantis underfunded and misdirected Jeep to the point that it’s a fraction of what it was and risks losing the future to EV companies like Rivian, Tesla, and even Chinese brands like BYD.

Ferrari’s detachment from FCA, in retrospect, was a great move. Jeep is a much larger automaker and needs shared platforms to be successful so that might not have worked. Still, Stellantis so far hasn’t proven it deserves to own Jeep or knows what to do with it.

Is CUPRA In Trouble?

Here’s a good example of me not being able to predict the future: If you’d asked me a decade ago which Volkswagen subbrand would be the most exciting and well-positioned for global expansion in 2025 I’d have probably said Škoda, because I love Škoda. I’m not saying that a brand based on Spanish-affiliate SEAT’s Cupra subcompact performance car would be the last brand I’d have picked, but it wouldn’t have been first.

And yet, Cupra is killing it right now. Its mix of hybrid and electric vehicles are poised for a big second half of the decade. Or, well, they were. Now it’s a little less certain. Specifically, CUPRA had a plan to help its parent company meet EU-mandated CO2 targets by selling a Chinese-built Tavascan SUV in large numbers in Europe. Proposed Chinese tariffs of up to 21.3% could have the effect of making that SUV now too expensive to sell at volumes that were predicted.

From Reuters this morning:

“It puts the whole financial future of the company at risk,” Griffiths said, speaking from Barcelona. “The intention was to protect the European car industry but for us, it’s having the opposite effect.”

The comments are the strongest yet by a carmaker affected by the tariffs, highlighting worries Brussels will hurt domestic players it is trying to protect via its probe of Chinese subsidies launched almost a year ago.

The anti-subsidy tariffs are on top of the EU’s standard 10% duty on car imports, a measure the Commission says is aimed at levelling the playing field and countering what it says are unfair subsidies. Beijing has threatened to retaliate with probes into EU imports of dairy, pork and cognac.

Complexity! The EU said it wanted more EVs so automakers did the logical thing and made deals with China, which was subsidizing EV development and production, so it could then sell those Chinese-built cars in Europe (and elsewhere). Now the EU, and other governments, are saying: We want clean cars, we don’t really want to pay too much for them, and you can’t build them where it’s cheaper.

Is that fair? Volkswagen would argue it isn’t and they aren’t alone. In particular, SEAT says it plans to build most of its cars in Europe and this is a “one-off” designed to get a new EV to market quickly and affordably and that its car isn’t particularly subsidized (though given the investment China made in battery infrastructure, every new EV is de facto subsidized by those investments).

Again, it’s complex, though VW is also working the refs (in this case the EU) here a bit because that’s what big companies do.

Is VW Going To Back Out Of Its ‘No-Layoffs’ Pledge?

Speaking of working the refs, Volkswagen is a partially state-owned enterprise as the German state government of Lower Saxony owns about 13% of the automaker.

Volkswagen famously said it would not close any plants, a promise made way back in 1994 and is supposed to continue until the end of this decade. That might not be the case anymore, according to the Associated Press:

“The European automotive industry is in a very demanding and serious situation,” Oliver Blume, Volkswagen Group CEO, said in a statement Monday.

He cited new competitors entering the European markets, Germany’s deteriorating position as a manufacturing location and the need to “act decisively.”

Thomas Schaefer, the CEO of the Volkswagen Passenger Cars division, said efforts to reduce costs were “yielding results” but that the “headwinds have become significantly stronger.”

Understandably, the local unions are not happy. This could just be a plea for more concessions or some other changes in policy (see above). Or it could be the prelude to the first plant closing since the ill-fated VW facility in Pennsylvania in 1988.

China Might Get A Six-Seat Model Y

CEO Elon Musk continues to think of Tesla as a company that makes robots, robotaxis, and basically everything other than cars. But it still has to make cars. That’s how it makes money. In particular, it makes a ton of Model Ys.

The Model Y is a great car but, like many of Jeep’s products, it’s getting a little long-in-the-tooth and planned updates have been delayed. The good news is that a refreshed Model Y, codenamed Juniper, is likely going to launch early next year.

Even better and slightly more amusingly, they’re going to make a six-passenger car for China because they reportedly don’t think they can sell the seven-seater that Americans buy:

Tesla sells a seven-seater Model Y in the U.S. but a cramped third row would make it unpopular in China, the people said.

“It’s not even large enough for a large-sized dog,” one of the people said.

Lol. This is definitely true.  I’ve got a buddy who designed cars in China for years and is now designing interiors here and, contrary to what you think, the Chinese consumer has way higher expectations now than your average American.

Presumably, the configuration would be 2-2-2 as opposed to 2-3-2 for the U.S version, though a 1-2-3 configuration could be fun.

What I’m Listening To While Writing TMD

I will now get five of you to listen to “The Three E.P.s” by The Beta Band.

The Big Question

Is Stellantis really to blame for Jeep’s problems? Was it really FCA’s fault? Or, even more provocatively, is Jeep fine?