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Fiat Chrysler's US$4.5b US push includes new Detroit plant

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Fiat Chrysler announced Tuesday plans for US$4.5 billion in new US investment to upgrade five plants and build the first new assembly plant in Detroit in almost three decades.

[NEW YORK] Fiat Chrysler announced Tuesday plans for US$4.5 billion in new US investment to upgrade five plants and build the first new assembly plant in Detroit in almost three decades.

The announcement - a bet on strong US demand for larger vehicles for the foreseeable future - gives a positive jolt to the Midwestern state of Michigan, the traditional base of the American auto industry.

The existing plants, all also located within Michigan, will be enhanced to boost output of popular Jeep and Ram trucks, as well as to manufacture electric vehicles and two new autos under the Jeep brand, the company said.

Michigan has been the recipient of plenty of hard knocks over the years as automakers have shifted more manufacturing capacity overseas and to the southern United States, where labor unions are weak.

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On Tuesday, FCA separately said it was cutting more than 1,000 jobs in the state of Illinois.

State and local officials in Michigan hailed the announcement, a centerpiece of which is the conversion of FCA's Mack engine plant in Detroit into an assembly plant with 3,850 new jobs to build trucks, SUVs and plug-in hybrid vehicles.

The automaker will also boost investment into its Jefferson North factory in Detroit, adding another 1,100 jobs.

The two city projects will comprise the only automotive assembly plants in the city of Detroit, FCA said.

AGREEMENT WITH CITY 

However, the Detroit expansion will require about 81 ha of additional land. The city of Detroit signed a memorandum of understanding with FCA to reach agreements within 60 days to reach agreements to purchase the land.

The MOU also requires the city to complete city tax abatements for the auto company, expected to be worth US$12 million over the next 12 years.

The state of Michigan also has made separate commitments to FCA, according to a summary MOU released by the city.

"This opportunity is unlike anything we have seen in decades and it's going to be crucial that we come together in the interest of our city and our residents over the next 60 days to bring nearly 5,000 new good-paying jobs to this neighborhood," said Detroit Mayor Mike Duggan.

"Over the next two months, we will be out in the neighborhoods every day working with the residents to make this happen for our city. Most importantly, we're going to bring these 5,000 jobs to Detroit without displacing a single resident."

INDUSTRIAL REBIRTH? 

General Motors last year announced it would shutter five North American plants in a cost-cutting push, including two in Michigan. Ford is also preparing a restructuring plan that could involve deep layoffs.

With the gloom of the GM and Ford news, "this is breath of fresh air," Detroit-based Cox Automotive economist Charlie Chesbrough said of the FCA news.

But Mr Chesbrough said at this point the FCA announcement was a "one-off" and should not be seen as a precursor to an auto manufacturing rebirth in Michigan or the northern United States.

Mr Chesbrough said automakers were generally loath to make large capital investments in part because of uncertainty over industrial costs as President Donald Trump contemplates potentially deep tariffs on European auto imports.

An FCA spokeswoman confirmed on Tuesday the company would lay off 1,371 workers at an Illinois plant in Belvidere, saying the company would try to reassign workers as other jobs become available.

FCA said its ramp-up in the United States was in line with a strategic shift undertaken in 2016, in which it retooled several plants to discontinue compact car production and shift more manufacturing capacity to trucks and other large vehicles that have assumed an ever-increasing share of the US market amid relatively low gasoline prices.

"Today's announcement represents the next step in that strategy," said FCA Chief Executive Mike Manley.

"It allows Jeep to enter two white space segments that offer significant margin opportunities and will enable new electrified Jeep products, including at least four plug-in hybrid vehicles and the flexibility to produce fully battery-electric vehicles."

AFP