Windsor plant's future depends on FCA's minivan strategy

Fiat Chrysler Automobiles must grapple with whether to continue its two-minivan strategy as sales decline in North America and as the Dodge Grand Caravan approaches the end of production.

What the automaker decides will have a major impact not only on the segment it invented 36 years ago, but also on the future of FCA's Windsor, Ontario, minivan assembly plant, which employs more than 6,000 hourly workers on three shifts.

"The likelihood of the minivan share of the total market increasing is pretty slim longer term," said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. "The consumer has made up their mind pretty well that crossover vehicles are more practical than minivans and often quite a lot cheaper.

"To keep that plant sustainable, you would think that they have to find another product for it."

According to Canada's Unifor union, FCA plans to invest $350 million into the Windsor plant "for future product," but the automaker has not confirmed what that product would be.

In March, Automotive News Canada reported that FCA was expected to retool the plant over the summer so that an all-wheel-drive powertrain could be added to the Chrysler Pacifica minivan.

Meanwhile, industry analyst Joe McCabe said that in addition to the all-wheel-drive Pacifica, FCA plans to replace the Grand Caravan with an entry-level minivan bearing the Voyager nameplate.

Speaking with Automotive News Canada in May, McCabe said the new product is likely to be an entry-level minivan, and not a crossover, because FCA is unlikely to want to cede leadership in the minivan segment even as sales dip.

"One of the biggest risks for any manufacturer getting out of a [segment] is this idea of 'lost to someone else,' " said McCabe, the CEO of AutoForecast Solutions. "And right now, Chrysler, being the leader in [the segment], can't risk to dilute themselves enough to the point where minivan buyers will look elsewhere."

The Voyager would appeal to the same cost-conscious buyers of the Grand Caravan, McCabe said.

"They just can't afford to risk that foothold that they have in the minivan space," he said. "I think there's more of a risk in killing the Caravan and having only one Pacifica and having too many trim levels where they lose the high-end Caravan buyer to a higher-sized Pacifica. That's where we see the risk. They have to make sure they backfill the more cost-conscientious Caravan buyer."

An FCA spokeswoman declined to comment.

Ryan Tessier, general manager of Drumheller Chrysler in Alberta, said he expects FCA to adjust its product strategy should the Grand Caravan be phased out. A dual-minivan strategy, including a van with a lower price, is "pretty important" to dealers, Tessier said, adding that at a minimum he thinks Chrysler would introduce larger rebates and cheaper packages on the Pacifica to attract Caravan customers.

"I don't think they're going to leave a big gap in the market in terms of price," Tessier said. "I'm sure Chrysler's got a strategy where if they phase out the Grand Caravan, then the Pacifica will fill in the gaps where the Grand Caravan was."

The minivan segment continues to sputter in the United States and Canada, hurting vehicle production at Windsor. The minivan plant is slated to lose its third shift in September, a move that will affect the jobs of 1,500 hourly workers.

According to estimates from the Automotive News Data Center, Windsor produced 310,522 minivans in 2018, up 21 per cent from 2017. Production in 2019 through April was down 10 per cent from a year earlier.

Fiat Chrysler Automobiles sold 151,927 Grand Caravan minivans in 2018, a 21 per cent increase from 2017, while Pacifica sales were flat. Through April, Pacifica sales were down 29 per cent compared with the same period a year earlier, while Grand Caravan sales were down 22 per cent.

If that trend holds, FCA may need to add another product in the Windsor plant to keep it viable, even if the automaker proceeds with a minivan to replace the Caravan. DesRosiers said a crossover would make sense, given the segment's rapid growth in recent years.

"I'm not sure they have to have anything exceptional relative to their competitors," he said. "They just need another product in that segment."

AutoForecast's McCabe said the Windsor plant could eventually be used to build crossovers on the Pacifica's platform. Any crossover based on that platform would ride lower than a typical crossover, he said, giving that product a way to differentiate itself in a crowded market.

"Now are you getting back into a, for lack of a better term, station wagon look?" McCabe said. "It's got a crossover feel, but it doesn't have as high of a ride height as a crossover would."