The Jeep Cherokee is racking up huge sales gains despite terrible marks for reliability. Source: Fiat Chrysler.
It scored near the bottom of two J.D. Power quality studies earlier this year. It came in 27th (out of 28) in Consumer Reports 2015 "Car Brand Report Cards," one of only four brands with no vehicles recommended by the magazine. And it just got panned in another study that focused on customer satisfaction (more on that below).
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But Fiat Chrysler Automobiles has high hopes that its Jeep brand will deliver huge global growth over the next few years.
Jeep is a key part of FCA's plan to boost earnings by 2018. But given consistently disappointing quality and customer-satisfaction results, can the creaky old SUV brand really deliver?
Jeep's U.S. sales are still very strong So far, it seems to be working. U.S. Jeep sales were up 21% in the first half of 2015, and there are no signs that sales have slowed.
U.S. sales results for July won't be released for over a week. But Kelley Blue Book analyst Alec Gutierrez has taken a look at some preliminary data, and as he sees it, Jeep is still looking strong.
Gutierrez thinks FCA is set to lead most of its rivals in sales growth in July, and that's "almost entirely on the momentum of the Jeep brand." He noted that Jeep has set monthly sales records for 20 months straight, and it has driven a big chunk of FCA's overall sales growth over that time.
A lot of that growth has come from the midsize Jeep Cherokee, which seems to have hit a sweet spot with consumers. U.S. sales of the Cherokee were up 31% over (good) year-ago results in the first half of 2015, and Gutierrez thinks the midsize Jeep's growth will continue for a while longer.
In fact, Jeep may be in the process of getting another sales boost. The small Renegade has been gradually making its way to U.S. dealers, and increased availability could give Jeep's July sales numbers an additional boost, Gutierrez said.
So, the news is good -- in the very near term. But given Jeep's dismal quality ratings, how long will this continue? Or put another way, how many of these new Jeep customers will be willing to buy another one?
Low quality and satisfaction ratings could put the Jeep boom at risk That may sound like a smart-aleck question. But here's the thing: FCA is hoping to win new Jeep customers in regions where the brand hasn't historically had much of a presence, namely Europe, China, and Latin America.
Check out this chart from last year's presentation of FCA's five-year plan. As you can see, FCA is relying on big growth in Jeep sales from "localization," or the introduction of the brand in new markets around the world.
Source: Fiat Chrysler Automobiles.
Can today's Jeep lineup deliver an experience that will turn those new customers into loyal Jeep fans?
We know buyers are sometimes willing to overlook imperfect quality if a vehicle gives them a high level of satisfaction in other ways. We also know FCA has a knack for winning over buyers' hearts, as the sustained success of products like its Dodge muscle cars has shown.
J.D. Power has an annual study that seeks to measure that kind of satisfaction. Called the APEAL Study, for "Automotive Performance, Execution and Layout," it uses a 77-point survey to try to evaluate "how gratifying a new vehicle is to own and drive," the company says.
The latest edition of the APEAL Study came out this past week. As you can see, Jeep -- once again -- ended up near the bottom.
Two of FCA's products did manage to win their respective segments, namely those Dodge muscle cars, the Charger and Challenger. But Jeep, the iconic and supposedly beloved SUV brand, didn't even manage to crack the top three in any of the SUV segments.
This isn't good news.
Is Fiat Chrysler trying to do too much, too quickly?I admire the audacity of FCA CEO Sergio Marchionne's five-year plan, and I like a lot of what the Fiat-Chrysler mashup has been able to do with the old Chrysler's products over the last few years. They've come a long way very quickly, and much credit is due.
But I wonder if the company is simply trying to do too much, too quickly right now. It's spending billions to relaunch Alfa Romeo and Maserati as global luxury-car brands while simultaneously working to boost its presence and profits in the ultra-competitive U.S. full-size pickup segment--and rolling Jeep out to new customers all over the world. (Among other things.)
That's a lot for any company to be doing at once. Part of the risk is the things that aren't getting done during this frenzy of activity, the kinds of factory updates and incremental improvements that other automakers invest in to boost quality over time.
My concern isn't that FCA will fail to deliver all of these new Alfas and Jeeps. It's that the company will succeed, in the sense of getting all of those new products to all of their new markets -- but the quality and execution of those products won't be good enough to deliver the sales (and profits) Marchionne wants.
If that happens, this whole five-year plan could crash and burn. So far, buyers have continued to show up -- but the ongoing quality and customer satisfaction issues could be putting this run of sales gains at risk. Stay tuned.
The article Is Fiat Chrysler's Jeep Boom About to Go Bust? originally appeared on Fool.com.
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