Jeep CEO lays out turnaround plan after huge sales decline

Detroit — StellantisThe Jeep brand is well known for climbing tough terrain, but its latest challenge of reaching 1 million unit sales in the country by 2027 will be a tough hill to overcome.

Jeep, a popular brand in the auto industry, has been struggling with sluggish sales in the U.S., with annual sales declining for five consecutive years and 2024 potentially marking the sixth year.

Still, Jeep CEO Antonio Filosa believes the worst is over for the brand and that the 1 million-unit sales goal is still within reach. The company is executing a turnaround plan for the quintessential American SUV brand, which he says is already turning a profit after U.S. sales fell 9% in the first half of the year.

The plan includes lowering prices across the entire lineup, including production models like the Jeep Compass and Grand Cherokee SUV, rolling out special offers like incentives and 0% financing, and increasing spending on marketing and advertising, Filosa said, adding that the company will also hold road shows with dealers soon to address further issues and concerns.

While such practices can eat into profits, the brand’s average transaction price has soared to more than $50,000 this year, up from less than $40,000 in 2020, according to Cox Automotive. Cox reports that the average transaction price for Jeeps has been above the industry average since 2021.

“The good thing is that the steps we’ve taken over the past few months are also delivering important growth in the U.S.,” Filosa told CNBC in an online interview on Monday.

Filosa’s comments came the day before the chairman of the Stellantis National Dealers Council penned a scathing open letter targeting Stellantis CEO Carlos Tavares over the company’s sales losses and other management decisions.

Stellantis sold more than 1.5 million vehicles in the U.S. last year, down about 1% from 2022, while the industry as a whole is expected to grow 13% in 2023.

Jeep, which reports sales quarterly, said its U.S. sales rose last month: up 28% from August 2023 and up 55% from July, Filosa said. Jeep also reduced its vehicle inventory by about 25,000 units during the period. But the brand still has a long way to go before it can achieve a notable sales recovery.

Jeep’s U.S. sales plummeted 34% from a record high of more than 973,000 SUVs sold in 2018 to fewer than 643,000 last year. While most auto brands saw sales increases last year, Jeep’s sales fell about 6%.

The latest sales decline comes after the automaker last year ended production of the entry-level Renegade and the Cherokee compact SUV, two flagship models that peaked at roughly 300,000 units sold annually in the U.S. from 2016 to 2019.

“For Jeep, the loss of the Jeep Cherokee and Jeep Renegade is a big blow to our company,” Filosa said. “Our market coverage has dropped from an average of 80 percent to 45 percent.”

Filosa said he expects Jeep to regain market share “very quickly” with the launch of a Cherokee successor and new electric models by the end of next year, allowing it to regain 80% market share, including in competing segments.

In addition to dropping new models, Stellantis brands such as Jeep have prioritized profits over market share during Tavares’ tenure as CEO.

Tavares has been working to cut costs at the automaker since it was formed in January 2021 through a merger between Fiat Chrysler and France’s PSA Group, as part of his “Dare Forward 2030” plan to increase profits and double sales to 300 billion euros ($325 billion) by 2030.

As part of that plan, Jeep aims to sell about 1.5 million SUVs globally by 2027, including 1 million in the United States.

To achieve those goals, Tavares said he spoke with the company’s dealers earlier this year and agreed to relax some pricing, incentives and other financial targets.

Those efforts are continuing, including meeting with dealers to discuss the turnaround effort, Mr. Filosa said. He will join Bob Broderdorff, the brand’s new head of North America, in a dealer roadshow starting next month.

Jeep, the top-selling plug-in hybrid electric vehicle in the U.S., also has several new vehicles on the way. The brand will launch the all-electric Wagoneer S later this year and next year a Jeep Wrangler-inspired “Recon” SUV and extended-range plug-in versions of its Wagoneer and Grand Wagoneer large SUVs.

Jeep said these vehicles have led it to increase its media spending by 20 percent compared to the first half of the year.

“Now is the time to recover sales as much as possible. [they] Next year, we will talk about growth because we have new products. … I believe so. [next year] It will be a completely different story,” Filosa said.

Jeep is also working to improve the quality and reliability of its vehicles, which have historically received below-average ratings in third-party rankings, including delaying the launch of the upcoming Wagoneer S and Recon by four to six weeks, he said.

But in the auto industry, building problem-free vehicles is easier said than done. Jeep confirmed Monday that it is cooperating with U.S. auto safety regulators in an investigation of more than 781,000 new Jeep Wrangler and Gladiator SUVs after reports of underhood fires.

Mr. Filosa acknowledged he was aware of the investigation but gave no further details. Mr. Tavares earlier this year cited quality problems within the company, particularly at a plant outside Detroit that makes the Ram 1500.

“I am monitoring the evolution of the quality of the Jeep Wagoneer S and now the Jeep Recon very closely at the factory,” Filosa said. “The only command I give to the factory is to deliver vehicles of perfect quality.”

The new all-electric SUV will be built at Stellantis’ Toluca assembly plant in Mexico. The company has not yet said where it will build the successor to the Cherokee SUV, which was built at a now-silent Illinois factory.