Bloomberg News

Chrysler Invests $1.7 Billion for Jeep SUV, Holds Loan Talks

November 16, 2011

(Updates with CEO’s comment in 11th paragraph.)

Nov. 16 (Bloomberg) -- Chrysler Group LLC, the U.S. automaker majority owned by Fiat SpA, said it will invest $1.7 billion to update a Jeep sport-utility vehicle and add production at its factory in Toledo, Ohio.

Chrysler and the U.S. Energy Department also held a conference call today on the company’s application for $3.5 billion in loans under a program to encourage production of fuel-efficient vehicles.

The Toledo investment includes $500 million to expand the assembly plant and add about 1,100 jobs, the Auburn Hills, Michigan-based company said today in a statement distributed at the factory. Sergio Marchionne, chief executive officer of Chrysler and Turin, Italy-based Fiat, said the name of the SUV hasn’t been decided and the loan talks were a high priority.

“As we speak, people are on a conference call with them now,” Marchionne told reporters. “We’ll see where it takes us. I’m working my buns off to get it done.”

Chrysler’s investment in Toledo comes after the company last month raised its 2011 financial forecast to a profit of about $600 million from $200 million to $500 million, excluding costs associated with paying back U.S. and Canadian government loans. The company also reported third-quarter net income of $212 million.

Chrysler will increase employment at the Toledo plant to more than 2,800 after a second shift is added in 2013’s third quarter, according to today’s statement. The factory builds the Jeep Liberty and Dodge Nitro SUVs.

Second Vehicle

The automaker is likely to build a second vehicle in addition to the new Jeep in Toledo, Marchionne said. The plant will build vehicles for the U.S. and for export, he said.

Europe’s debt crisis won’t derail his companies’ investments, Marchionne said.

“We have been incredibly cautious,” he said. “The majority of the growth of the expectations around Fiat are unfortunately outside of the European complex.”

Fiat, PSA Peugeot Citroen and Renault SA led declines in European car sales during October as registrations dropped 1.4 percent to 1.04 million vehicles, the Brussels-based European Automobile Manufacturers Association, or ACEA, said today in a statement. Marchionne said he isn’t optimistic about the region’s car market next year.

“I am not hopeful about 2012 at all, he said. ‘‘This crisis is going to take its toll on volumes.’’

Praise for Monti

Marchionne praised Italian Prime Minister Mario Monti, who he said has ‘‘international credibility.’’ Monti was sworn in today to take over an unelected government charged with imposing austerity to prevent the euro area’s third-biggest economy from succumbing to the debt crisis.

‘‘I sincerely hope the political forces in Italy align behind this project of re-establishing Italy,’’ he said. ‘‘The plan can be put in place relatively quickly. That’s all the international capital markets are looking for. They’re looking for clarity of plan and execution that is believable. Monti has all the qualities to get this done.”

Fiat is targeting a merger with Chrysler within the next three years. Marchionne said today instability in Italy may affect the decision on where the combined company will be based.

“I would be lying to you if I told you it didn’t,” he said. “That’s not to say that the current situation will force us to move away from Italy. We’re committed to the industrial backbone of the country. The country has to make some tough choices going forward, and it has to make them now.”

Sales Climb

The majority of Chrysler’s revenue comes from U.S. sales, which rose 23 percent to 1.12 million light-vehicle deliveries this year through October, according to researcher Autodata Corp. Industrywide sales gained 10 percent during that span, according to Woodcliff Lake, New Jersey-based Autodata.

The United Auto Workers on Oct. 26 ratified a new four-year labor contract with Chrysler. The agreement called for investing $4.5 billion in facilities and adding 2,100 jobs.

The accord also pays Chrysler’s 26,000 U.S. union workers a $3,500 signing bonus, half of which is contingent on meeting financial targets. The contract also raises entry-level worker pay without boosting wages for higher-paid senior workers.

Fiat is moving to raise its ownership stake in Chrysler by an additional 5 percent to 58.5 percent by the end of this year after assembling a 40 mpg vehicle in the U.S.

--Editors: Bill Koenig, Jamie Butters

To contact the reporter on this story: Craig Trudell in Toledo, Ohio, at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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