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Fiat-Chrysler's Plan For New Jeep Assembly Plant In Detroit Hits All The Right Notes

Dec 7, 2018

"Imported From Detroit," indeed: Fiat Chrysler Automobiles reportedly will convert an idled engine factory in Detroit into a new assembly plant in a move that squarely hits so many on-trend positive notes, it can be considered an early Christmas present for Fiat Chrysler workers, the City of Detroit and President Trump.

In one of his biggest acts since taking over as Fiat Chrysler CEO last summer from the late Sergio Marchionne, Michael Manley apparently decided to build a new three-row Jeep Grand Cherokee SUV on the site of Mack Avenue Engine II, a plant in central Detroit that has been idled since 2012 and is adjacent to a working engine plant. Sources told the Detroit News that the vehicle, which will be the brand's largest, will be produced for the 2021 model year and that the move could add as many as 400 new auto jobs in the Motor City.

It would be the first new assembly line to open in Detroit in 27 years and the first new U.S. assembly plant to be built by any of the Detroit Three in at least a decade. Typically, assembly plants account for thousands of jobs, but the new facility presumably will access many existing Fiat Chrysler employees from its Jefferson Avenue assembly plant across the street.

An official announcement of the plan, expected next week, would send a welcome signal to Fiat Chrysler workers about the continued viability of a company that always has been the least tenable of the Detroit Three automakers, giving them a welcome new stake in the tenure of Manley and coming not long before quadrennial national-contract talks between the car companies and the United Auto Workers next year.

The retooling of a factory site into a new assembly plant, even if it's not greenfield construction, also would comprise another huge boost to the economic fortunes and self-confidence of a city that went through bankruptcy not long ago but recently has revived with billions of dollars of new investments in downtown Detroit, steadily spreading outward.

And Fiat Chrysler's move, of course, is likely to be hailed by President Trump as another example of the success of his Make America Great Again industrial policy and regular browbeating of manufacturing CEOs aimed at getting them to retain and add to U.S. production. General Motors CEO Mary Barra got exactly the opposite treatment after the company's recent announcement that it plans to close up to five North American plants and idle as many as 15,000 workers.

Ironically, it was Marchionne a few years ago who loudly proclaimed that the auto industry was riding too much manufacturing capacity and that this irrefutable problem should lead to industry rationalization; then he peppered Barra continually with proposals to merge GM with Fiat Chrysler, but it never happened.

Now, it's Marchionne's former company that has done such a good job of expanding sales of its flagship brand, Jeep, that Manley can only salute his old boss -- and his outdated analysis from a few years ago -- and move on with adding capacity while GM retrenches domestically and Ford seems destined to do so as well.

Manley's move also ratifies Marchionne's strategy of exiting domestic production of sedans a couple of years ago and retooling that factory space to feed America's growing appetite for Jeeps and for Ram pickup trucks. Fiat Chrysler was the first to strategically realign around SUVs and trucks, which are higher-profit than sedans and which face still-increasing demand by American consumers who are turning away en masse from traditional cars.

Fiat Chrysler plans to keep adding Jeep models. The only way Manley could do that was by adding capacity, not simply switching models from one existing factory to the next. The company's plant utilization is 92 percent, according to LMC Automotive, a forecasting firm, versus 81 percent for Ford and 72 percent for GM. And Fiat Chrysler's U.S. sales have risen in 2018, by 8 percent through November, driven by demand for Rams and Jeeps.
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