Fiat Chrysler to launch $4.5B investment in Michigan plants

Fiat Chrylser will spend $4.5 billion to build a new production plant in Detroit and expand manufacturing capabilities at five other Michigan facilities, the carmaker said on Tuesday.

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The investment – which the Auburn Hills, Michigan-based company says will create 6,500 new jobs – comes as Chrysler focuses more heavily on its Jeep and Ram brands and prepares to launch new models to better align with consumer preference for pickups and sports utility vehicles.

Today’s announcement allows Jeep to enter new "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,” CEO Mike Manley said in a statement.

But while consumers demand for those vehicles models remain high, industry analysts and experts are warning that the U.S. auto market is nearing – or past – peak demand. While U.S. auto sales are down in the first two months of 2019, Manley remains confident.

"We run down-term scenarios so we know what we return to across the group should we see a downturn," he told reporters. "The economic indicators as we see them are still strong."

The announcement also comes as President Trump mulls increasing tariffs on auto imports, a move that would reverberate through the industry and could weigh more significantly on domestic manufacturers, experts say.  Manley said the company plans to continue to export the Jeep Grand Cherokee, and also said there was international interest in a new three-row, full-size Jeep SUV.

"All of these vehicles will be opened up for our export markets," he told reporters.

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Of the total investment, $1.6 billion will be directed towards converting the two plants that make-up the Detroit-based Mack Avenue Engine Complex into a new manufacturing site. The facility -- which Chrysler says is the first new assembly plant in the city in almost three decades -- will manufacture the next generation of Grand Cherokees, slated to begin shipping in 2021, and the new three-row SUV.

The additional funding will create 3,850 new jobs, according to the carmaker, and construction is slated to begin in the second quarter of 2019.

Another $900 million will be deployed to modernize the Jefferson North plant in Detroit, which will be used for production of the Dodge Durango and the pending upgrade to the Grand Cherokee. The company is also increasing to $1.5 billion a previously announced investment in its Warren, Michigan-based assembly plant that will manufacture the new Jeep Wagoneer and Grand Wagoneer – slated to start in early 2021 -- as well as the Ram 1500 classic. Combined, the two investments will drive 2,500 new jobs.

Chrysler will continue to produce the new Ram Heavy Duty in Mexico.

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The projects are “contingent on land acquisition and the negotiation of development incentives” with Detroit and other cities, the company said in the statement.

"We've been clear in terms of our level of investment," Manley said. "When you make these levels of investment, you obviously rely on a very close working relationship with the city you're investing in and obvioulsy the state. We've enjoyed that relationship."