FCA commits $1 billion to two U.S. plant retoolings

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Automotive News/Reuters  /  January 8, 2017

Fiat Chrysler Automobiles will spend a combined $1 billion retooling its decades-old Warren Truck Assembly plant to build Jeep Wagoneers and Grand Wagoneers as well as its Toledo Supplier Park to one day build Wrangler-based Jeep pickups.

Both retoolings are expected to be completed by 2020, and will add a combined 2,000 jobs, the automaker said in a statement today. The plant actions were not unexpected, and were first revealed during 2015 negotiations with the UAW and first reported by Automotive News Sept. 1, 2015.

However, in its release Sunday, FCA did include one surprise: The automaker claimed that “an added benefit of the investment in Warren is that it will enable the plant to produce the Ram heavy duty truck, which is currently produced in Mexico.”

Note: Second generation regular cab (BR) Dodge heavy duty pickups (2500/3500) were built at Warren during the 1990s. A historical footnote, the Sherwood and Hoover Road assembly lines at Warren produced Dodge medium and heavy trucks.

That sentence would indicate one of two possibilities. One is that FCA had altered its plans to build the luxury-level Jeep Wagoneer and Grand Wagoneer on the same unibody platform as the next-generation Grand Cherokee and instead plans to build them as truck-based frame vehicles, like the Chevy Suburban.

The other possibility is that the money will be used to add a second unibody line to Warren Truck Assembly, which has been building Dodge and later Ram pickups since the 1930s.

FCA’s Toledo Assembly Complex currently builds the unibody Jeep Cherokee and the body-on-frame Jeep Wrangler, but on two separate assembly lines.

A spokesman for FCA declined to comment. CEO Sergio Marchionne is scheduled to hold a series of private press conferences at the Detroit auto show Monday morning. FCA will display its Chrysler Portal concept minivan -- unveiled last week at CES in Las Vegas -- at the Detroit auto show Monday, but has no scheduled product press conference.

In a written statement, Marchionne said “the conversion of our industrial footprint completes this stage of our transformation as we respond to the shift in consumer tastes to trucks and SUVs, and as we continue to reinforce the U.S. as a global manufacturing hub for those vehicles at the heart of the SUV and truck market.

“These moves, which have been under discussion with [UAW President] Dennis Williams and the rest of the UAW leadership for some time, expand our capacity in these key segments, enabling us to meet growing demand here in the U.S., but more importantly to increase exports of our mid-size and larger vehicles to international markets.

“The expansion of our Jeep lineup has been and continues to be the key pillar of our strategy. Our commitment to internationalize the Jeep brand is unwavering, and with these last moves, we will finally have the capacity to successfully penetrate markets other than the U.S. which have historically been denied product due to capacity constraints. In addition, these all-new products will reach new consumers, as well as those that have been part of the Jeep tradition,” Marchionne said.

Trump impact

FCA's announcement, meanwhile, upped the ante as automakers respond to threats from President-elect Donald Trump to slap new taxes on imported vehicles. The auto industry has a keen interest in getting relief from tough fuel economy rules enacted by the outgoing Obama administration.

Many automakers plan to use the Detroit auto show to tout investments in the U.S. and a commitment to U.S. employment against the backdrop of Trump's criticism of automakers for shipping vehicles into the U.S. from Mexico.

Most of the major automakers in the U.S. have substantial vehicle making operations in Mexico, as well as complex networks of parts makers that supply their factories in the U.S. and support jobs and investment in states such as Ohio and Michigan.

FCA's investment decisions were not related to Trump's recent attacks Ford Motor Co., General Motors and Toyota Motor Corp. for building cars for the U.S. market in Mexico, people familiar with company's moves said on Sunday.

The company had already signaled plans to expand truck and SUV production at its U.S. plants, and discontinued production of small- and medium-sized cars in two U.S. factories.

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 U.S. in case FCA encounters more criticism from Trump.

Still, Fiat Chrysler's announcement landed as executives global auto industry executives gathered for the annual auto show in a climate of growing uncertainty about the trade and regulatory policies the new Republican administration will pursue.

Trump, who will be inaugurated on Jan. 20, has talked about rolling back environmental regulations, and supporting corporate tax cuts -- moves automakers would welcome. He has just as explicitly warned that he will move to raise the costs of importing vehicles from Mexico, a policy industry executives said could hurt their businesses.

U.S. investments

Since Trump's election, automakers and other companies have played up their investments in the U.S.

Last week, Ford scrapped plans to build a $1.6 billion plant in Mexico and invest $700 million in a factory in Michigan. Ford will still move production of Focus small cars to Mexico, but will instead cut total production of the cars by consolidating their assembly in an existing Mexican plant.

Hinrich Woebcken, CEO of the North America Region for German automaker Volkswagen AG, told Reuters on Sunday the automaker plans to invest $7 billion in the U.S. between 2015 and 2019 and will start building its new Atlas SUV in Tennessee later this year.

Volkswagen has had a plant in Mexico for 50 years and it is not shifting any jobs to Mexico from the U.S. "We do not make our investment decisions based on administrative cycles. Our business is really an 8-, 12-, 14-year horizon when we look at investments," Woebcken said on the sidelines of the Detroit auto show.

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[kscarbel2]

Automotive News  /  January 9, 2017

Fiat Chrysler has dramatically altered its product course and will now bring its new Jeep Grand Wagoneer back to life as a body-on-frame SUV, after nearly two years of claiming that it would be unibody like almost all other luxury nameplates.

In comments to reporters at the Detroit auto show, FCA CEO Sergio Marchionne confirmed Monday that the company now plans to build both a Wagoneer and Grand Wagoneer as body-on-frame vehicles. The new SUVs will be built at a retooled Warren Truck Assembly plant in suburban Detroit, which now builds the current-generation Ram 1500.

The abrupt switch in product plans is likely to mean that the automaker’s dream of a $140,000 Grand Wagoneer to compete against the Range Rover, as laid out in November by Jeep brand boss Mike Manley, won’t happen.

Instead, a much less expensive luxury Jeep is likely aimed at General Motors’ profitable Chevy Tahoe family of body-on-frame SUVs. Marchionne has previously said that he coveted the profits GM generates from its large SUVs.

The switch is likely good news for FCA dealers, who faced the prospect of having a very expensive vehicle in their inventory without a natural customer base in that price range.

Right now, the highest-priced Jeep -- the unibody 2017 Grand Cherokee SRT -- starts at $67,890, including shipping. A body-on-frame three-row Grand Wagoneer is more likely to stay closer to the brand’s initial price estimates of $100,000 and sell in higher volumes, at least in the U.S.

Jeep’s leadership has been pushing for a luxury line above the Grand Cherokee, and included plans for it in its 2014 five-year business plan. As recently as June, Manley said that “the Wagoneer name represents historically the pinnacle of premium for the Jeep world. But in the same way as you may have an Overland and a Summit, you have different trim levels, so you could imagine the use of Wagoneer to denote a really premium vehicle, and Grand Wagoneer takes it to the very next level. So if you were to use that as your naming strategy, that’s exactly how I would use the trims.”

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