Fiat Chrysler Automobiles will invest $1 billion to retool and modernize two plants in the U.S. Midwest, including one that would be able to make the Ram heavy-duty pickup truck currently produced in Mexico, it said on Sunday.
The automaker said the investment would create more than 2,000 production-related jobs. The company also said it planned to add three new Jeep models, including a pickup truck, to its product lineup and make them in the United States.
The announcement comes as U.S. President-elect Donald Trump has threatened to slap large tariffs on vehicles imported into the United States from Mexico.
Trump, a Republican, has attacked Ford Motor Co and more recently General Motors Co and Toyota Motor Corp for building cars in Mexico.
He mostly criticized Ford during the campaign. But in October in Michigan, the then-presidential candidate singled out FCA layoffs, adding: "Those jobs went to Mexico, China, India and other countries."
FCA executives did not confer with Trump before making the decision on the new big SUVs and a Jeep pickup truck, according to a person familiar with the company's thinking. The same source said Marchionne wanted to get out the news about adding jobs and investment in the United States in case FCA encounters more criticism from Trump.
Last week, Ford scrapped plans to build a $1.6 billion plant in Mexico and invest $700 million in a factory in Michigan.
FCA said a plant in Warren, Michigan, near Detroit, would make the Jeep Wagoneer and Jeep Grand Wagoneer SUVs, while a Toledo, Ohio, factory would produce the Jeep pickup.
The company said the production plans in Ohio and Michigan were "subject to the negotiation and final approval of incentives by state and local entities."
U.S. consumers have increasingly shifted toward SUVs and pickup trucks and away from sedans in recent years, as gasoline prices have remained relatively low.
A year ago, Marchionne said FCA would cease production of two sedans and focus on SUVs and pickups.
Marchionne said in a statement on Sunday that the lineup changes were due to that consumer shift. "We continue to reinforce the U.S. as a global manufacturing hub" for SUVs and pickup trucks, he added. (Reporting by Nick Carey, David Shepardson and Bernie Woodall; Editing by Alan Crosby and Lisa Von Ahn)
|© REUTERS/Rebecca Cook A Chrysler Warren Truck Assembly sign is seen in front of the Fiat Chrysler Automobiles (FCA) plant in Warren, Michigan|
Fiat Chrysler plans to invest $1 billion in 2 U.S. factories as it expands its Jeep lineup
Fiat Chrysler will add three new Jeeps to its lineup including a pickup truck as it invests $1 billion in two U.S. factories, furthering its effort to increase production of hot-selling SUVs and pickup trucks and get out of producing small and midsize cars.
The Italian-American automaker said Sunday it will modernize a factory in the Detroit suburb of Warren to make the new Jeep Wagoneer and Grand Wagoneer large SUVs. A factory complex just south of there in Toledo, Ohio, also will get new equipment to make the new pickup.
The company wouldn't provide details of the new products, but said the factory work would be done in 2020. The expansion is expected to create 2,000 new jobs.
Consumers worldwide have gravitated toward SUVs and trucks while turning away from passenger cars. Last year in the U.S., car sales fell 7% while truck and SUV sales rose 8%.
Last year, Fiat Chrysler announced plans to stop production of the slow-selling Dodge Dart and Chrysler 200. Factories that make those products in Sterling Heights, Mich., and Belvidere, Ill., will get new trucks and SUVs as the company searches for an automaker that would build small cars under contract.
The factory upgrade in Warren also would allow the plant to make heavy-duty Ram pickups that now are produced in Saltillo, Mexico. But Fiat Chrysler would not say if it has plans to shift production to the north.
Producing vehicles in Mexico and shipping them to the U.S. has become a thorny political issue with the election of Donald Trump as president. Trump has criticized Ford, General Motors and Toyota for building small cars in Mexico and shipping them across the border. He has threatened to impose a big border tax on the companies.
The issue is so sensitive that General Motors Chief Executive Mary Barra, at an event before the Detroit auto show Sunday, said that her company has no plans to change production plans despite Trump’s criticism.
Barra, who is part of a group of CEOs that will advise Trump on economic issues, noted that capital decisions in the auto business are made two to four years in advance.
Fiat Chrysler’s decision to expand capacity is “enabling us to meet growing demand here in the U.S., but more importantly to increase exports of our midsize and larger vehicles to international markets,” Chief Executive Sergio Marchionne said in a statement.
He added that those markets “have historically been denied product due to (factory) capacity constraints.”
The new Jeep pickup, which could be a version of the Wrangler SUV, would be the company's first pickup since the mid-1990s.
The moves cap a series of factory changes that Fiat Chrysler announced starting in July, when the company said it would sink $1.5 billion into the Sterling Heights plant so it can be equipped to make Ram pickups. The 3,000-worker plant made the Chrysler 200 midsize car, but it closed as production ended last month.
The Warren plant will keep making Rams until the Sterling Heights factory is updated, then it will close temporarily so it can be retooled to make the large SUVs.
The company also said last summer that it would spend $1 billion to retool the Toledo factory for production of a new Jeep Wrangler. That plant's Jeep Cherokee will move to Belvidere, which stopped making the Dodge Dart compact car and Jeep Compass and Patriot small SUVs last year.
Fiat Chrysler said the investments are subject to negotiations and approval of tax incentives by local and state governments. The company would not say how much would be invested in each plant or how many new jobs would go to each.
Chart of the day: Fiat Chrysler shares gain on US investment plan
Fiat Chrysler (FCAU) is Yahoo Finance’s chart of the day on news that the automaker will invest $1 billion in US manufacturing. The announcement comes after President-elect Donald Trump criticized automakers for plans to build plants in Mexico and ship cars to the US to be sold. Chrysler has said it will renovate two plants in Michigan and Ohio. The move is expected to be completed by 2020 and create 2,000 new jobs.
Shares of Fiat Chrysler are rising on the news, bringing the stock’s total gains over the past three months to nearly 60%.
Fiat Chrysler has also said it is looking into possibly moving production of heavy-duty pickups that are currently made in Mexico to the US.
The company’s announcement follows Ford’s (F) news last week that it was canceling plans to invest $1.6 billion for a new assembly plant in San Luis Potosi, Mexico. Trump also threatened General Motors (GM) and Toyota (TM) with border taxes if they sell automobiles in the US that are imported from Mexico.
For more on Trump’s potential impact on the auto industry, check out The Final Round on Yahoo Finance, live today at 4 p.m. Eastern.