Buoyed by strong sales numbers from many of its high-profit Jeep models, Fiat Chrysler Automobiles announced Thursday its overall 2017 profit nearly doubled from the previous year.
FCA said its net profit jumped to $4.35 billion in 2017 thanks to intense interest in high-margin vehicles like Grand Cherokee, Jeep Wrangler, Compass and Cherokee, even though overall sales dropped 8 percent.
The company statement also said its U.S. hourly workers would receive profit-sharing checks averaging $5,500 because of FCA’s growth. This is in addition to the recent $2,000 bonus the automaker is handing each of its hourly employees thanks to tax breaks gained from recent legislation.
FCA CEO Sergio Marchionne said Thursday during a conference call that he was pleased with the company’s 2017 performance.
“This is the fourth year in a five-year plan that we launched back in ’14,” he said. “As a management team, I think we feel relatively good about the fact that we haven’t missed a year since the plan was launched. Overall we feel pretty good about what we’ve been able to achieve for the first four years of the plan.”
The company’s 2017 North American revenue fell just about 4 percent to $81.9 billion on sales of just over two million units. However, much of that decline can be attributed to the company’s decision to virtually end fleet unit sales, as well as a discontinuation of several sedans.
FCA announced back in January 2016 plans to de-focus on that car market in order to strictly target sales of higher margin truck and SUVs. It has also sought to reduce those lower-margin fleet sales in order to drive up brand value. The automaker ended 2017 with its lowest retail-to-fleet (88-12) sales percentage since emerging from bankruptcy back in 2009.
Another company focus in 2017 was to eliminate much of its existing debt load and Marchionne said Thursday that FCA’s debt levels were down $7.54 billion from 2016.
“We’re looking forward to finally walking into this meeting in Q2 and telling you that we no longer have debts,” he said. “It’s going to be a big day here when we get there.”
While FCA is currently sporting a 16-month sales decline, new and revamped models like its 2018 Jeep JL Wrangler, Compass and Cherokee, as well as an all new Dodge Ram built in the U.S., have been well-received and are expected to lead the company back into positive sales for 2018.
“The new Ram 1500 and Jeep Wrangler are both getting positive initial reviews, so if FCA can nail the launches of their bread-and-butter products, it will give the company a needed bright spot in 2018,” said Edmunds Executive Director of Industry Analysis Jessica Caldwell to The Detroit News.
It may not happen right away as forecasters expect FCA sales to drop about 15.2 percent in January, however that streak should end soon as more new Wranglers and Compass units reach the market, and the Grand Cherokee continues to perform.
"It’s typical to see a slowdown at dealerships in January following the high-selling holiday months,” Caldwell said. “This isn’t necessarily a solid indicator of the direction that the year is headed in terms of overall sales.”
About 40,000 U.S FCA hourly employees will receive their $5,500 profit-sharing checks later in February, which also marks a jump from last year’s $5,000 amount.
With this payment, FCA U.S. hourly employees have received, on average, more than $23,000 in profit sharing since 2009.
This perk is negotiated into the 2015 FCA-United Auto Workers Collective Bargaining Agreement, and is based off FCA’s 2017 North American adjusted earnings before interest or tax.
The redesigned 2018 Compass reached dealerships this past August and has shown sales growth throughout the latter half of 2017. Jeep's new Wrangler JL is currently reaching showrooms, while a refreshed 2019 Cherokee is expected later this year.
For more info on the Jeep Wrangler JL, check out our JL Showcase Page.
