Raphael Stevens

Jeep is executing a turnaround plan of the quintessential American SUV brand after five years of consecutive declines in the U.S. market.
The Stellantis brand has a target of selling roughly 1.5 million SUVs globally by 2027, including 1 million in the U.S.
Jeep’s U.S. sales have plummeted 34% from an all-time high of more than 973,000 SUVs sold in 2018 to less than 643,000 units last year.

 Jeep Wagoneer S Trailhawk EV concept
Michael Wayland / CNBC

DETROIT — Stellantis’ Jeep brand is well known for scaling tough terrains, but its latest challenge of achieving 1 million vehicle sales domestically by 2027 will be a steep hill to climb.
Jeep, a coveted brand in the automotive industry, has been in a U.S. sales rut that has included five years of annual sales declines, with 2024 on pace to potentially become the sixth.

Nonetheless, Jeep CEO Antonio Filosa believes the brand’s worst days are behind it and it’s still possible to achieve the 1 million sales target. The company is executing a turnaround plan for the quintessential American SUV brand that he says is already beginning to pay dividends following a 9% sales decline in the U.S. during the first six months of the year.
The plan has included lowering pricing across its lineup, including on high-volume models such as the Jeep Compass and Grand Cherokee SUVs; rolling out special offers such as incentives or 0% financing; and increasing spending on marketing and advertising, Filosa said. It also will include an upcoming roadshow with dealers to address additional problems and concerns.

Such actions can eat into profits, but the brand’s average transaction prices have skyrocketed from less than $40,000 in 2020 to north of $50,000 this year, according to Cox Automotive. Jeep’s average transaction price has been above the industry average since 2021, Cox reports.
“The good thing is that the actions we implemented in the previous months, they are also resulting in important growth as well in the U.S.” Filosa told CNBC during a virtual interview Monday.
Filosa’s comments were made a day before the chairman of the Stellantis National Dealer Council penned a scathing open letter targeting Stellantis CEO Carlos Tavares over the company’s sales losses and other business decisions.

Stellantis sold more than 1.5 million vehicles last year in the U.S., a roughly 1% decline from 2022. That compared to an industry increase of 13% in 2023.

Jeep sales

Filosa said Jeep, which reports sales quarterly, saw U.S. sales rise last month: They were up 28% from August 2023 and 55% from July. Jeep also lowered its vehicle inventory by about 25,000 units during that time. But the brand has a ways to go to accomplish any notable turnaround in sales.
Jeep’s U.S. sales have plummeted 34% from an all-time high of more than 973,000 SUVs sold in 2018 to less than 643,000 units last year. While most auto brands increased sales last year, Jeep was off by about 6%.

The New York Stock Exchange welcomes The Jeep Brand (NYSE: STLA) to the podium, on May 31, 2024. To honor the occasion, Antonio Filosa, Chief Executive Officer, joined by Lynn Martin, President, NYSE Group rings The Opening Bell®.

The most recent declines follow the company ending production last year of the entry-level Renegade and the Cherokee compact SUV — two mainstream models with peak U.S. sales of around 300,000 units annually from 2016 to 2019.
“For Jeep to lose Jeep Cherokee … and Jeep Renegade has been an important hit to us,” Filosa said. “Our market coverage declined from an average of 80% to 45%.”
Filosa said Jeep expects to recover market share “very quickly” and return to an 80% market share coverage, which includes the segments Jeep competes in, by the end of next year, when it introduces an unnamed replacement for the Cherokee as well as new electrified models.

Looking forward

In addition to the termination of the new models, Stellantis’ brands such as Jeep have focused on profits over market share under Tavares’ time as CEO.
Tavares has been on a cost-cutting mission since the company was formed through a merger between Fiat Chrysler and France’s PSA Groupe in January 2021. It’s part of his “Dare Forward 2030” plan to increase profits and double revenue to 300 billion euros ($325 billion) by 2030.
As part of that plan, Jeep is targeting selling roughly 1.5 million SUVs globally by 2027, including 1 million in the U.S.
To achieve such goals, Tavares earlier this year said he has allowed leniency in some pricing, incentives and other financial targets after speaking with the company’s dealers.
Filosa said he is continuing those efforts by meeting with dealers regarding the turnaround initiatives. He’ll participate in a dealer roadshow beginning next month with the brand’s new North American head, Bob Broderdorf.

Stellantis CEO Carlos Tavares photographed next to a Jeep Avenger at the Paris Motor Show on Oct. 17, 2022.
Nathan Laine | Bloomberg | Getty Images

Also assisting Jeep, which is the top seller of plug-in hybrid electric vehicles in the U.S., will be several new vehicles. The brand is launching the all-electric Wagoneer S later this year, followed next year by a Jeep Wrangler-inspired “Recon” SUV and extended-range, plug-in versions of its large Wagoneer and Grand Wagoneer SUVs.
Ahead of such vehicles, Jeep has increased its media spending by 20% compared with the first half of the year, according to the automaker.
“Now it’s time to push, and to accelerate, sales to recover as much as [they] need to do. Next year, obviously, we will talk all growth, since we have new products. … I believe [next year] will be a completely different story,” Filosa said.
Jeep also is attempting to increase the quality and reliability of its vehicles, which have historically ranked below average in third-party rankings. He said this includes delaying launches of its upcoming Wagoneer S and Recon by four to six weeks.
However, building problem-free vehicles is easier said than done in the automotive industry. Jeep on Monday confirmed it is cooperating with U.S. auto safety regulators on an investigation into more than 781,000 newer Jeep Wrangler and Gladiator SUVs after reports of underhood fires.

2024 Jeep Wagoneer S EV

Filosa confirmed knowledge of the probe, but he declined to provide additional details. Tavares earlier this year highlighted quality problems within the automaker, specifically at a plant in suburban Detroit that makes the automaker’s Ram 1500.
“We are very carefully monitoring the evolution of quality of Jeep Wagoneer S in the plant, and Jeep Recon as well,” Filosa said. “The only mandate that the plants have from me is to just deliver the car when it’s in perfect quality.”
The new all-electric SUVs will be produced at Stellantis’ Toluca Assembly Plant in Mexico. The company has not confirmed a production location for the replacement to the Cherokee SUV, which was produced at a now-dormant plant in Illinois.

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Coach’s owner Tapestry and Michael Kors’ owner Capri are in the courtroom this week for a federal antitrust challenge.
The companies are trying to combine into a single company, after announcing the $8.5 million acquisition last year.
The FTC sued to block the deal in April, saying it will lead to higher prices for consumers.

Pedestrians walk past a Coach store and a Michael Kors store.
Scott Olson | Getty Images

Just a few miles from the birthplace of Coach in New York City, a federal judge will soon decide whether its owner Tapestry can become a bag behemoth — in a decision that will weigh big questions about how much consumers are paying for goods and the choices they have when they shop.
Investors, lawyers and reporters have flocked this week to a courtroom in Manhattan for an antitrust trial over a Federal Trade Commission lawsuit that seeks to stop the merger of Tapestry and Capri. The deal, if approved, would put six fashion brands under a single company: Tapestry’s Coach, Kate Spade and Stuart Weitzman with Capri’s Versace, Jimmy Choo and Michael Kors. 

Tapestry and Capri announced the $8.5 billion deal more than a year ago, but the FTC sued to block it in April. It argued the combined companies would take away competition and leave consumers with fewer affordable handbag options and employees with worse pay and benefits.
Attorneys for the FTC have argued this week that the merger would harm consumers by putting Coach and Michael Kors — two brands it described as having similar prices and often competing head-to-head — under the same company. Both brands sell directly to customers on their websites and in stores, but also are carried by stores that cater to Americans across incomes including department stores Macy’s and Dillard’s, off-price retailers like T.J. Maxx and outlet stores.
Tapestry and Capri, on the other hand, have argued the deal will allow them to keep up in a trend-driven industry where newer brands and changing consumer tastes are a competitive threat. At the time when the companies announced the deal, Tapestry’s CEO Joanne Crevoiserat told CNBC that it’ll allow Tapestry to reach more customers across age groups and incomes across the global, especially in the luxury and higher-end markets.
The outcome of the antitrust case could shape the outlook for the industry that makes the bags, eyeglasses and apparel that many Americans carry and wear across the country. It comes as Americans increasingly balk at high prices after years of high inflation — and the Biden administration takes aim at mergers in the grocery, technology and apparel spaces.

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Investors are watching the trial closely for how it could affect shares of Tapestry and Capri. Shares of Tapestry are up more than 13% this year. On the other hand, Capri’s stock has tumbled about 21% this year.

Here are key questions that have defined the first three days of the trial, including highlights from some of the testimony:

How fierce is competition in the handbag industry?

In a fast-moving world where a new product can become the “it” bag from a TikTok video or celebrity sighting, Tapestry and Capri have argued that competition is fierce — even for the biggest handbag players.
With the transaction, Tapestry and Capri’s executives have argued the brand could better compete with the wide variety of other retailers and brands that consumers choose from, ranging from fast-fashion brands like Zara and H&M to European luxury names like Burberry and LVMH’s Louis Vuitton.
One of the major debates in court has surrounded who are Coach and Michael Kors’ true competitors. Are they each other’s main rivals, or do they compete with a vast mix of brands that steal away sales? The FTC has defined the relevant market for two brands as “accessible luxury,” a term that Tapestry has used with its investors and board of directors to describe how it offers higher-end fashion looks at a better value.
Yet attorneys for Tapestry and Capri have pushed back, saying that the field of rivals is growing to include more price points.
Crevoiserat said she’s seen that dynamic close to home. Lululemon, known for its popular leggings and other athletic apparel, is the maker of belt bags, a hands-free, fanny pack-like bag that can be wrapped around the waist or slung across the body. The bags have been a hit, especially with younger shoppers.
“What really pains me about that is my daughter has one,” she said. “They’re a meaningful brand.”
In her testimony, Crevoiserat said the competition isn’t just with other handbag or fashion brands. She said the company is fighting to woo consumers who have many ways that they could spend their dollars.
“They could go anywhere,” she said. “They could buy a pair of yoga pants or go out to dinner. It’s discretionary.”
During the trial, attorneys have showed off industry data from market research companies and internal documents, such as consumer surveys and research on the competition. The research has related to not only Tapestry and Capri, but also other fashion brands including Chanel and Rebecca Minkoff.
Attorneys for Tapestry and Capri have argued that competition has intensified, as consumers have new ways to shop and their style preferences change. On the other hand, attorneys for the FTC have said the combined companies would corner the “accessible luxury” market.
Some executives from other brands have also testified on the state of play in the industry. Suwon Yang, Chanel’s head of merchandising for accessories and leather goods, took the stand on Wednesday. She said customers buy from many brands, but Chanel in its own research focuses on how it stacks up against European luxury lines like Saint Laurent and Hermes. She said in her experience, Coach, Kate Spade and Michael Kors have never come up in customer surveys or company conversations about the competition.
She also described the rigor of the craftsmanship behind Chanel’s bags, which she said sets the brand apart and leads to its price points of about $5,000 to $11,000 or even higher. Handbags are made in Italy and France, and for artisans, it takes a decade to make the company’s highest level of handbag.

Would the deal hurt consumers?

The FTC argues the deal would bring more sticker shock for American consumers already facing higher prices on many items.
On Wednesday, economist Loren Smith, one of the FTC’s key witnesses, took the stand and contended that the merger would turn the combined companies into a handbag giant that would raise prices for shoppers and have little reason to invest in sharper styles or better materials. Smith is a Washington, D.C.-based consultant and former staff economist for the FTC.
He laid out financial models and methodology he used to define the market for Tapestry and Capri, and particularly Coach and Michael Kors, saying they primarily compete with other “accessible luxury” players even if its consumers shop with other cheaper and pricier brands. He zeroed in on the handbag market in the U.S., and included common styles like cross-body bags and totes in the calculations.
Ultimately, he said he found the merger raises “significant competitive concerns” and his simulation indicated that it would lead to an average price increase of 15% to 17% for the combined company’s goods and a decrease in the quality of products.
If the two companies became one, he said the combined company would have about 58% market share in the handbag market in the U.S. He said Tapestry could get away with raising prices on Michael Kors handbags since it could recapture lost sales by attracting enough of those same shoppers to Coach and Kate Spade bags.
And he said it wouldn’t need to worry as much, even if Michael Kors’ brand continued to be challenged.
“Once they come together, if Michael Kors continues to decline, some of that decline is going to benefit the Coach brand,” he said.
Plus, he said, the handbag industry has margins of 60% to 80%, a high number that makes the risk of diverting customers to another of their brands or losing customers to other brands less significant.
He estimated annual consumer harm would add up to $365 million per year from a combination of price increases and merchandise that wouldn’t be as well made.
Attorneys for Tapestry and Capri pushed back on how he defined the competition, questioned his calculations and said he did not account for shoppers’ newer habits, such as the ability to buy a Louis Vuitton or Prada bag at a lower price because of the rise of secondhand marketplaces.
They also argued Smith is out of touch on the handbag market. The attorney for Tapestry and Capri noted that he’s only bought one handbag before, and his wife instructed him what to buy.

Why did Tapestry want to buy Capri?

When Tapestry CEO Joanne Crevoiserat took the stand on Tuesday, she said her goal for the merger is straightforward: Putting more handbags in the hands of more customers.
Attorneys for the fashion brands rolled carts of dozens of handbags from the two companies and from competitors into the courtroom on Monday, the day the trial began. Since then, a mix of executives and industry players have taken the stand, including Capri CEO John Idol and Coach CEO Todd Kahn.
In her testimony on Tuesday, Crevoiserat held up a few of the handbags in the room. She spoke about their contrasts and how the bags illustrate the range of brands that Tapestry owns. She said Tapestry benefits from having a portfolio of distinct brands to cater to customers who shop for a variety of occasions and have different senses of style.
She showed off Coach’s Rogue, a maple colored leather tote bag that a customer might use to carry what she needs to the office. Then, she held up another bag, a more playful looking smaller green and white Kate Spade bag that’s made of woven fabric and has been featured in Netflix’s “Emily in Paris.”
Capri has its own distinctive brands too, she said.
Internal documents also flashed on the courtroom screen, showing some emails and slide decks from a more than year long process that Tapestry pursued as it looked for an acquisition target and deliberated whether to buy a still emerging brand or a more established player like Capri. The names of other acquisition targets were redacted, but the code name for Capri was “Comet.”
Crevoiserat said Tuesday that if the deal closes, Tapestry would want to grow all of its brands — especially those of Capri, which has had weaker sales in recent quarters.
“I believe we can inject more relevancy, more vibrancy into the Capri brands,” she said.
Instead of operating as a top-down company, Tapestry is a house of brands, Crevoiserat said. She added Coach, Kate Spade and Stuart Weitzman each have independent teams that select merchandise, set pricing and shape marketing.
As the FTC raises questions about whether the deal will raise prices, she said Tapestry as a whole offers cost-savings benefits that come from having more scale, such as manufacturing and transporting products at a lower price.
She said that way of operating wouldn’t change. She added the high price tag to acquire Capri only makes sense if Tapestry gives the brand both financial support and creative freedom.
“The deal simply wouldn’t pencil if all brands couldn’t grow,” she said.
The antitrust trial continues on Thursday and is expected to run through early next week. Attorneys for the FTC have hinted that other key witnesses are poised to testify, including more executives from Tapestry and Capri and the namesake of one of the top brands in the merger, American fashion designer Michael Kors. More

Airlines are raising their unit revenue forecasts for the third quarter.
Flights are getting more expensive again, according to the latest inflation report.
Carriers have been moderating capacity growth after a glut of flights pushed down fares.

Delta Airlines planes are seen parked at Seattle-Tacoma International Airport on June 19, 2024 in Seattle, Washington. 
Kent Nishimura | Getty Images

Airlines are reporting better unit revenues for the tail end of summer, a sign customers will continue to have to shell out more to fly in the coming months.
Alaska Airlines on Thursday raised its third-quarter profit forecast to a range of $2.15 to $2.25 per share from a previous outlook of no more than $1.60 per share. It also said it expects unit revenue to rise by as much as 2% after previously estimating flat to “positive” unit revenue growth over last year.

Delta Air Lines said domestic and trans-Atlantic unit revenue would be up in September from last year, though it said the CrowdStrike outage in July will mean unit sales will rise no more than 1% compared with a previous forecast of as much as 4% higher for the quarter. Delta has said it expected a $500 million hit from the outage and its aftermath, when it canceled some 7,000 flights.
Alaska said it had a tail wind from the outage, which affected Delta customers more than those on other airlines.
“While capacity remains in line with prior expectations, revenue has performed better than anticipated driven by additional revenue in July related to CrowdStrike disruptions across the industry and stronger performance in August and September,” Alaska said in a securities filing.
Delta’s president, Glen Hauenstein, told a Morgan Stanley conference on Thursday that Delta isn’t seeing a lingering impact on bookings from the outage.

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Airlines had been wrestling with record numbers of travelers but lower fares and weaker-than-expected pricing power. That appears to be changing.

Wednesday’s U.S. inflation report showed an airfare price index rose 3.9% in August after five consecutive months of declines.
Frontier Airlines said Wednesday that it might break even this quarter, on an adjusted basis, after a previous forecast of margins ranging from -3% to -6%, after it moderated capacity. Last week, JetBlue Airways raised its unit revenue growth forecast for the current quarter because of higher demand and a benefit from the “re-accommodation of customers affected by other airlines’ cancellations due to technology outages in July.”
Airlines from full-service carriers like Delta and United to budget airlines like Frontier and Spirit have been chasing higher-spending travelers with perks like more space on board.
“We are constantly thinking about what we can do to continue to increase that competitive gap with premium products, from improving the food we serve on our planes to improving our loyalty program, to improving our Wi-Fi product, to improving particularly our Polaris product on international first class,” United’s CFO Mike Leskinen said at the Morgan Stanley conference on Thursday.
U.S. airlines have also slowed if not halted hiring altogether this year as aircraft arrive late from Boeing and Airbus, and demand moderates after a massive hiring spree.

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American Airlines flight attendants on Thursday voted on a new five-year labor deal, giving cabin crews more than 20% immediate raises.
The approval ends one of the industry’s most contentious labor negotiations.
Airline and other workers have pressed companies for higher pay and better benefits.

Julie Hedrick, president of the Association of Professional Flight Attendants, right, announces a strike authorization outside Dallas-Fort Worth International Airport near Dallas on Aug. 30, 2023.
Shelby Tauber | Bloomberg | Getty Images

American Airlines flight attendants approved a five-year labor deal, ending one of the industry’s most contentious contract negotiations and giving cabin crews raises of up to 20.5% at the start of October.
Eighty-seven percent of the American Airlines flight attendants who voted approved the contract, the union said Thursday, shortly after polls closed.

“This contract marks a significant milestone for our Flight Attendants, providing immediate wage increases of up to 20.5%, along with significant retroactive pay to address time spent negotiating,” said Julie Hedrick, president of the Association of Professional Flight Attendants, which represents the carrier’s roughly 28,000 cabin crew members.
Flight attendants are the biggest unionized work group at the Fort Worth-based airline.
The contract deal is a relief for American Airlines’ leaders, which had faced a strike threat from flight attendants if the two sides could not get to a deal. Transportation Secretary Pete Buttigieg and Labor Secretary Julie Su had attended negotiations in June, overseen by the National Mediation Board. More than 160 lawmakers have also pushed the NMB to get to deals across the airline industry.

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“Reaching an agreement for our flight attendants has been a top priority, and today, we celebrate achieving this important milestone,” American Airlines CEO Robert Isom said in a statement.
Flight attendants, similar to other airline workers, have pushed for higher pay and other work-rule improvements after the Covid-19 pandemic derailed negotiations and the cost of living has skyrocketed in recent years.

United Airlines and its flight attendants’ union are still negotiating for a new contract, while Alaska Airlines cabin crew members recently rejected a tentative labor deal.
Other industries have also won higher pay in new contracts, some of them after strikes, such as in the auto industry and in Hollywood.
Some 33,000 Boeing workers are voting on Thursday on a new contract with 25% raises, which some workers have said they will reject. Boeing faces a potential strike if the deal is rejected.

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