NEW YORK (TheStreet) -- Fiat Chrysler Automobiles (FCAU) has sounded lately like an automaker on the brink, an impression reinforced last week by a report citing unnamed suppliers who said the company was delaying future vehicles, perhaps to defer spending.
Earlier, Fiat Chrysler CEO Sergio Marchionne called for consolidation and collaboration among automakers to reduce wasteful capital spending. His statements might be seen as alarming -- or possibly alarmist -- at a time when his company's sales are growing, as well as vehicle sales generally in the U.S., Europe and China.
Marchionne emailed Mary Barra, CEO of General Motors (GM), suggesting they discuss a possible tie-up, a communication that Fiat Chrysler Chairman John Elkann confirmed in late May. GM said publicly it's not interested in a deal with Fiat Chrysler.
Adam Jonas, Morgan Stanley's auto analyst, last week published a report suggesting several reasons other than troubles at FCA for delaying vehicle models, or at least for telling suppliers that it's delaying development.
"Delaying launches on at least 12 new vehicles in North America may seem puzzling at first blush," said Jonas in a June 4 report. "We suspect it's symptomatic of a management team working with a sense of urgency to look for every last cost opportunity." Jonas rates Fiat Chrysler stock overweight. Of the three equity analysts that follow the stock, two have an overweight or buy rating, the other a hold.
In Jonas' view, raising questions about how quickly Fiat Chrysler will roll out new models prior to this summer's industry bargaining with the United Auto Workers union is a deliberate negotiating tactic. The union wants to end two-tier wage scales undertaken during the financial crisis to reduce labor costs for the Detroit-based automakers. The automakers want to maintain the lower wages and phase out the top tier.
"Why would FCA lock in production details and locations of key product before negotiations begin" when it might be advantageous to move production to Mexico or another site where costs are advantageous? Jonas wrote.
A second reason for delay could be to prepare product lines to be shared with partners, Jonas theorized, such that costs for development and manufacturing would be reduced for all. As Fiat Chrysler commits to its own suppliers and manufacturing sites, its flexibility finding partners -- with their own suppliers and factories -- is reduced. A vehicle like the sporty Jeep Wrangler, which needs revamping, could also be built as a Toyota (TM) or Ford (F), improving the per-vehicle profit for both partners.
Suggesting a third reason, Jonas wrote that rapid advances in electronic and other technologies plus changing regulatory requirements means that short delays can result in significantly improved new models.
Finally, Marchionne & Co. may be using delay to ponder the cancellation of some current models as other proposed vehicles look more promising in light of constantly changing consumer tastes. With Maserati, Alfa Romeo, Jeep, Chrysler, Dodge, Ram and others, FCA has plenty of options to create new models but limited resources.
Morgan Stanley's overweight recommendation, the firm said, is "driven by leadership's shared sense of urgency and dystopian view of the future of the automobile industry in the absence of radical change."
Team Marchionne's willingness to shuffle the deck, which mystifies some, has won him at least one fan on Wall Street.