DETROIT -- Fiat Chrysler Automobiles said on Tuesday it will invest $4.5 billion in five plants to build new models of Jeeps, hoping to bolster the brand so it can compete more effectively in the lucrative market for large SUVs and crossovers currently dominated by General Motors and Ford Motor Co.
The plants will also create 6,500 jobs in Michigan, Fiat Chrysler said in an announcement, around three months after GM announced it would not allocate new products to five plants in North America that mostly produce less-popular sedan models. GM workers and political officials including U.S. President Donald Trump have blasted GM for the decision which is likely to close those plants.
FCA's plans include turning an engine plant in Detroit into an assembly plant. Plans for the long-idled Mack II engine plant began to leak out in December. Full construction at the site is expected to begin by the end of June, FCA said in its statement Tuesday.
The moves also come at a time when the U.S. market looks set to decline, with 2019 industry-wide new vehicle sales expected to fall below the level of 2018.
Continued growth
But FCA CEO Mike Manley said in a conference call with reporters that the company's investments are focused on SUVs, an area "forecasted to continue to grow."
He added that 60 percent of SUV sales are for three-row models "and we don't have a three-row offering... and this is a segment that I've been very interested in for some time."
The full-size SUV segment is dominated by GM's Chevrolet Suburban, GMC Yukon and Cadillac Escalade, which had about double the sales of Ford's Ford Expedition and Lincoln Navigator in 2018.
In addition to reviving the Mack II engine plant, FCA's plans include turning an engine plant in Detroit into an assembly plant. The company has also reversed a decision to shift production of heavy-duty trucks from Mexico to Michigan in 2020, freeing up the Michigan facility to produce Jeep models.
"I look at today’s investment as a reward for the efforts of our membership and a show of confidence that the members of the UAW are the best auto workers in the world," UAW Vice President Cindy Estrada said in a statement.
Hybrids and EVs
The automaker said the plans included investments to enable three Michigan plants to produce hybrid and fully electric Jeep models. Manley said those hybrid models or electric models could be available as soon as late 2021, but will be rolled out based on consumer demand.
FCA said it plans to start full construction on the $1.6 billion Detroit facility at the former engine plant by the end of June and to start production of a new three-row SUV by the end of 2020, followed by a revamped version of the Grand Cherokee in the first half of 2021.
The city of Detroit has committed to assembling 200 acres of land in the next 60 days next to the Mack Avenue complex to provide FCA with more space for parking, new vehicle storage and construction equipment.
Detroit Mayor Mike Duggan cautioned that the land acquisition isn't a done deal.
"I think most people realize this is a once-in-a-generational chance to change the economic fortunes of thousands of Detroiters," Duggan said at a news conference at Detroit city hall.
Land assembly issues, tax breaks
About 170 of the 200 acres is under the control of the city of Detroit, DTE Energy, the Great Lakes Water Authority and the Moroun family, Duggan said.
Duggan and administration officials have had early discussions with all of the property owners about selling, but no transactions have taken place.
"We couldn't get deals until we had the (Memorandum of Understanding) signed with the company," Tom Lewand, a top city economic development official, told Crain's Detroit Business, an affiliate of Automotive News.
Duggan said land owners would be offered voluntary buyouts. City government has no power to seize private property for the private development through eminent domain. The 200-acre footprint does not include any residences, Duggan said.
"We're going to do this without putting anybody out of their homes," the mayor said, alluding to the city's controversial forced condemnation of the Poletown neighborhood in the early 1980s to help General Motors build its Detroit-Hamtramck assembly plant.
Detroit will assemble and purchase the land on FCA's behalf using taxpayer dollars as well as abate $12 million in taxes, "which in a $2.5 billion deal is pretty small," Duggan said.
"The state is making a larger contribution on the tax break side," the mayor added.
Michigan Economic Development Corp. CEO Jeff Mason declined to reveal details of the state tax incentives FCA will be offered through the Michigan Strategic Fund.
"We will use the tools available to us already in our tool kit to bring this project home," Mason said.
The automaker said it also would relocate production of its Pentastar engine from the Mack I engine plant in Detroit to the Dundee Engine Plant by the end of the third quarter this year. That retooling will require an additional $119 million investment in the Dundee plant, FCA said.
Meanwhile, the automaker will also start production of its Wagoneer model and the Grand Wagoneer, a new three-row luxury SUV, at a plant in Warren in the first half of 2021. Early last year, FCA had said it would move heavy-duty truck production to that plant, but it will now remain in the company's Saltillo, Mexico, plant.
FCA will invest $1.5 billion in the Warren plant -- up from a previous amount of $725 million that automaker had not publicly disclosed.
The plans also include a $900 million investment to modernize and retool another Detroit plant to make the Dodge Durango and the Jeep Grand Cherokee.
Congressional reaction
Members of the Michigan congressional delegation were thrilled by the news and applauded FCA for its confidence in American workers.
“Great news for Michigan from @FiatChrysler_NA today,” Rep. Debbie Dingell tweeted on her second day back at work in Washington following the death of her husband, former congressman John Dingell. “I want to thank them for their commitment to production in the US. Their investment decisions are an important part of keeping this country at the forefront of innovation and technology in transportation and mobility.
"Hard-working men and women in Michigan are ready to fill these jobs and keep America as a leader in this extremely competitive global marketplace. We can’t get ahead by building in another country and importing back."
Fellow Democrat Andy Levin said on Twitter that “growing good Michigan manufacturing jobs is a very smart move.”
Chad Livengood of Crain's Detroit Business and Automotive News staff contributed to this report.
