Yahoo Finance ‘Consumers aren't buying the damn things’: Chrysler’s pricey minivan problem
The award-winning Chrysler Pacifica Hybrid is lauded by automotive journalists for “electrifying” the otherwise hybridless minivan segment. It’s even been suggested the upscale Windsor, Ont.-built family hauler is the best all-round hybrid money can buy.
With its dual powertrain and a lofty $51,995 base price, there is no doubt it is a unique offering in a market dominated by sport utilities and crossovers. The problem facing the Italian-American automaker, and workers at its Windsor assembly plant, is the Pacifica is in all likelihood the best version of something nobody wants.
Last month, Fiat Chrysler Automobiles (FCAU) announced it will lay off 1,500 workers in Windsor to “better align with global demand.”
For Dennis DesRosiers, a leading Canadian auto industry analyst, the decision is proof of flaws in FCA’s “bold experiment” to resurrect minivan popularity, as well as a broad-based cyclical downturn in the North American auto sector.
“Find me a married couple with two kids who can afford a $50,000 minivan,” DesRosiers told Yahoo Finance Canada. “It also has an image issue. Sport utility vehicles and crossovers are sexy, and consumers are embracing them. Minivans have a negative image.”
Auto purchases fell 2.5 per cent year-over-year in March, marking a thirteenth straight month of year-on-year declines following near-record-high sales in early-2018, according to Scotiabank economist Juan Manuel Herrera. In the U.S., vehicle purchases fell by 2.2 per cent year-over-year in March for a third straight month.
“We’re clearly on the downside of the marketplace,” DesRosiers said. “We likely have another year of dealing with this.”
In June 2016, then-Ontario Premier Kathleen Wynne proudly stood in front of a Pacifica hoisted on a lift at a FCA facility to announce $85.8 million in grants for the company. The lionshare, $69 million, was earmarked to support investments that had already been made at the Windsor Assembly Plant to launch the Pacifica.
A news release said the money was part of plan hailed as “the largest investment in public infrastructure in Ontario's history” and an example of “investing in a low-carbon economy driven by innovative, high-growth, export-oriented businesses.”
“You have to understand that EVs are what politicians want everybody to buy,” said DesRosiers. “The EV market is give or take two-ish per cent of sales in Canada. The $5,000 federal subsidy will help a little bit. But when you get rid of the $14,000 Ontario subsidy, sales in Ontario collapse.”
Skip ahead to FCA’s latest earnings call, where chief executive officer Michael Manley boasted about an agreement to provide more Pacifica minivans to Google parent Alphabet’s (GOOG) self-driving car division Waymo for conversion to autonomous vehicles. Last May, Waymo announced an order of 62,000 to expand its autonomous-vehicle research into a commercialized ride-hailing service.
All this hype from journalists, executives, and politicians around the world’s first plug-in hybrid minivan hasn’t sparked much interest. Sales of the Pacifica Hybrid, and the less expensive non-electric version, have been challenged from within by the company’s cheaper and more popular Dodge Caravan. Not to mention the explosive popularity of SUVs and crossovers at the same price point that have decimated minivan and sedan sales.
FCA reported U.S. Pacifica sales for March fell 35 per cent year-over-year. In Canada, March sales plunged 66 per cent versus the same month last year.
“There is nothing wrong with the product. It's fabulous,” DesRosiers said. “The consumers aren't buying the damn things.”
Unifor national president Jerry Dias is pushing for a meeting with top Fiat Chrysler executives in Michigan in an attempt to save the 1,500 jobs slated for the chopping block.
The Windsor plant is Fiat Chrysler’s sole provider of minivans. The company said it does not have plans to shift production to another facility.
This latest setback for auto manufacturing in Canada comes on the heels of General Motors’ (GM) announcement in November that it would shut down its long-serving Oshawa, Ont. assembly plant, eliminating 2,600 jobs. GM said the Oshawa facility had been “running well below full capacity for several years” as consumers shunned the Chevrolet Impala and Cadillac XTS sedans it produced in favour of SUVs.
“There is not an analyst, including myself, five years ago that would have said that light trucks, pickup trucks, CUVs, and SUVs would be 75 per cent of the marketplace,” DesRosiers said.
Rumours have swirled about Fiat Chrysler looking at adding an all-wheel drive system to the Pacifica to woo SUV and crossover fans, and challenge the only other AWD minivan, Toyota’s Sienna.
DesRosiers expects Fiat Chrysler will pare back minivan production and slot another product into the plant, given the level of investment in the facility and quality of the workforce.
He said the 4,604 workers on the plant’s remaining two shifts should hope the company bets on a crowd pleaser this time.
“An SUV or crossover of some sort,” he predicts. “Go where the market it. You have no choice.”
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