Fiat Chrysler Automobiles NV said Thursday it would invest $1 billion to move production of profitable trucks from Mexico to Michigan, a move that will significantly lower the auto maker's exposure to potential changes to the North American Free Trade Agreement.
The company also said it would pay out $2,000 to approximately 60,000 hourly and salaried employees in the wake of U.S. corporate tax reform. The payout follows moves by other companies, but is the first prominent bonus for auto industry employees.
The plan calls for the relocation of Ram Heavy Duty trucks from Saltillo, Mexico, to a factory in Warren, Mich. It fulfills a move that Fiat Chrysler executives have been saying they would consider making for about a year following a separate $1 billion investment announcement in early 2017.
The company said moving the Ram Heavy Duty will add 2,500 new jobs in Warren. A commercial vehicle will eventually be built in the Saltillo plant.
The U.S., Canada and Mexico have been in negotiations to rewrite the 24-year-old Nafta agreement since August, and are headed for a crucial round in Montreal later this month. A main goal of the Trump administration in demanding the renegotiation has been to stop -- and reverse -- the flow of auto production from the U.S. to Mexico.
The U.S. representative in those talks, Robert Lighthizer, has complained that Mexico and Canada haven't been doing enough to satisfy U.S. demands.
But President Donald Trump, in an interview with The Wall Street Journal Thursday, was more positive, saying "We've made a lot of headway. We're moving along nicely." He did, though, repeat his previous threat that the U.S. would pull out of the pact if it didn't get what it needed in the talks.
Auto makers have revamped production plans since Mr. Trump's election in 2016. Ford Motor Co. canceled a plant in Mexico last year and Toyota Motor Corp. will open a $1.6 billion factory with Mazda Motor Corp. in Alabama by 2021.
Foreign auto makers have been expanding factories or building new ones at a faster clip than Detroit's Big 3. These foreign car companies are now poised to surpass domestic ones in U.S. production in coming years, but Fiat Chrysler's announcement could slow that development down.
Fiat Chrysler, like General Motors Co., Nissan Motors Co., and other auto makers, is heavily exposed to changes in Nafta. Fiat Chrysler increased Mexican production by about 40% in 2017 compared with 2016, according to WardsAuto.com building 626,000 trucks in Mexico, or 27% of its entire North American production volume.
Mexico exported 276,842 Ram Heavy Duty trucks in 2017, some 88% of them to the U.S., according to AMIA, Mexico's auto makers association.
The overall industry boosted production in Mexico by 13% last year while dialing back in Canada and the U.S. amid a slowing U.S. market. Lower wages and an arsenal of favorable trade deals have made Mexico attractive to auto makers.
Fiat Chrysler last year committed to invest $1 billion in two existing U.S. plants to ease pressure from Mr. Trump. The move is expected to create 2,000 new jobs.
Fiat Chrysler's $2,000 bonuses, meanwhile, were announced the same day Wal-Mart Stores Inc. said it would raise starting hourly pay to $11 for all its U.S. employees and hand out one-time bonuses, doling out some of the windfall it expects from the U.S. tax overhaul as it competes for store workers in a tight labor market.
"These announcements reflect our ongoing commitment to our U.S. manufacturing footprint and the dedicated employees who have contributed to FCA's success," Fiat Chrysler Chief Executive Sergio Marchionne said in a press release. "It is only proper that our employees share in the savings generated by tax reform and that we openly acknowledge the resulting improvement in the U.S. business environment by investing in our industrial footprint accordingly."
Fiat Chrysler is expected to pay out an additional profit-sharing check to its tens of thousands factory employees United Auto Workers later in the first quarter, part of its recent contract with the union. Ford and GM also pay out profit-sharing checks that could easily exceed $5,000 per employee.
--Jacob M. Schlesinger and Dudley Althaus contributed to this article
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(END) Dow Jones Newswires
January 11, 2018 19:45 ET (00:45 GMT)