Detroit finishes FCA land deals for new Jeep plant

DETROIT — Fiat Chrysler Automobiles on Friday said it was moving forward with a $1.6 billion plan to open a second Jeep assembly plant in Detroit after the city finished acquiring about 215 acres the automaker needed for the project.

Detroit Mayor Michael Duggan said the city is contributing $50.6 million toward land deals worth $107.6 million so that FCA can reopen and expand an idled engine plant to produce the next-generation Jeep Grand Cherokee and a three-row Jeep SUV. Key to the deal was a $43.5 million payment the city negotiated for 82 acres owned by the same family that sold Detroit's abandoned Michigan Central Station to Ford Motor Co. last year.

The new Jeep plant is the centerpiece of a $4.5 billion investment to retool and modernize several assembly sites in southeastern Michigan, including enhancements for production of electrified vehicles. But to open that plant, FCA in February said it needed the city to assemble the necessary land, and the company set a 60-day deadline of April 27. The city was still finalizing details as the deadline passed, and Duggan announced Friday afternoon that all of the necessary deals were in place.

"It was an extraordinary leap of faith by [FCA CEO] Mike Manley and the entire FCA team," Duggan said at a news conference. "Think about the implications to FCA. If we had come up short, they would have lost an entire year in their schedule if they had to start from scratch."

The Jefferson North Assembly Plant, across the street from the Mack Avenue Engine Complex being converted for Jeep assembly, will get $900 million in updates for the Dodge Durango and next-generation Grand Cherokee. A $1.5 billion investment at a truck plant in Warren, Mich., will support production of the new Jeep Wagoneer and Grand Wagoneer as well as continued assembly of the Ram 1500 Classic.

The 4,950 jobs created at the Mack complex and Jefferson North plant will come with an expected average wage of approximately $58,000 a year, according to the city's memorandum of understanding with FCA. Overall, FCA's investments are expected to create around 6,500 jobs in the region.

Crain's Detroit Business, an affiliate publication of Automotive News, reported that a citizens advisory council approved a community benefits agreement with FCA that commits more than $35 million in investments to the neighborhoods surrounding the Jefferson North and Mack sites, with the city of Detroit contributing $17.4 million and $4 million coming from federal and state sources. Crain's also reported that Detroiters will be allowed to apply for jobs at the Mack and Jefferson North operations "in advance of the general public," according to a document presented at an advisory council meeting last week.

Jeep dealers have been longing for legitimate three-row options, and they'll get them with the Wagoneer models and the other Jeep that will be produced at the Mack complex. While the boxy Commander offered a third row, some say it was too cramped to be of much use.

Houston Jeep dealer Steven Wolf has been asking for a roomy three-row Jeep since 1988. He said the product is long overdue and would be a "home run."

"If you put the word 'Jeep' on a product, it sells," Wolf said in December after The Detroit News reported that FCA was eyeing the Mack site as a potential home for a three-row Jeep. Wolf doesn't think the vehicle would sell as well under FCA's Chrysler or Dodge brands.

Wes Lutz, who owns Extreme Chrysler-Dodge-Jeep-Ram in Jackson, Mich., said a three-row vehicle makes the brand more enticing to young families who would rather buy utility vehicles instead of minivans.

For consumers who come to his store looking for three-row options, Lutz said salespeople have been able to show them only the Durango, Dodge Journey or a minivan.

"We think it will sell well," Lutz said. "Young families don't want a minivan. Our market for the three-row seat minivan has really morphed into more retirement people and businesspeople because they like to put the seats down and haul things."

Jeremy Acevedo, manager of industry analysis for Edmunds, said the unnamed three-row Jeep will compete with the Ford Explorer, Honda Pilot and Toyota Highlander.

"Now with Jeep entering that segment, Jeep is a force to be reckoned with," Acevedo said. "The fact that they're going to be expanding their size and expanding their appeal to a bunch of shoppers who kept the Grand Cherokee off their list because it didn't serve their needs. Opening that whole sector is huge for them, and bad news for everybody else in that space."

Patrick Foster, an automotive historian who has written several books chronicling Jeep's history, thinks FCA has learned a lesson from the Commander. It was discontinued after the 2011 model year because of poor sales and called "unfit for human consumption" by then-CEO Sergio Marchionne. Foster said the vehicle "looked like a tank" yet lacked interior room.

"They tried to squeeze this third [row] in the back," Foster recalled. "I was there at the launch at the [2005] New York auto show. Even then, people were coming up and saying it doesn't look like that third seat helps anybody. I think they tried to do it on the cheap. You have to do it right or not at all."

One question Foster has is what name Jeep will give the vehicle. Lutz, the Michigan dealer, thinks the Grand Cherokee has so much name recognition that FCA should stick with it somehow.

"They have in the past called me up and asked for a list of historic Jeep names, but they didn't this time," Foster said. "Whatever they choose, they choose. It doesn't always have to be a historic name, but sometimes, a historic name is just right."