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FCA’s Detroit plant project hinges on land deal

March 4, 2019

Automotive News

Vince Bond Jr. 

DETROIT — Nearly 10 years after Chrysler collapsed into bankruptcy, its owner is promising to bring a manufacturing surge to the Motor City that would provide a shot in the arm for the UAW.

If completed as envisioned, the $4.5 billion investment Fiat Chrysler Automobiles announced last week would create a truck-building empire on Detroit’s east side and add 6,500 jobs in the region. The most impactful piece would be a revamp of FCA’s Mack Avenue Engine Complex — including the idled Mack II engine plant — into a hub for the next-generation Jeep Grand Cherokee and a new three-row, full-size Jeep SUV.
But while city, UAW and FCA officials celebrated the prospect of another assembly plant within city limits, there’s one catch: It’s not a done deal yet.

To secure the Mack project, the city has less than two months to acquire about 200 acres of land from various owners.

Asked what would happen if the city can’t secure the extra land, FCA said only: “We have full confidence in the city of Detroit.”

If the city delivers on the land, and secures the 3,850 jobs that come with the Mack project, it could have big implications for labor talks with the UAW beginning this summer. For one thing, FCA would come to the bargaining table on the verge of surpassing GM’s hourly worker count.

According to profit-sharing announcements from the automakers, GM has 46,500 U.S. hourly workers compared with FCA’s 44,000. Between the new Jeep plant and planned GM layoffs, FCA is nearly certain to pass GM in the number of U.S. factory workers. GM would end up with the smallest hourly work force among the Detroit 3.

It could also help ease tensions between the rank and file and UAW leadership, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. Relations were frayed by a scandal involving union leaders accepting bribes from FCA officials in exchange for labor peace.

Yet she wonders how much credit UAW leaders will get from members, saying that some workers could view the investments as inevitable responses to product and political demands that didn’t require much of a lift from the union brass.

Dziczek said FCA will be buoyed by going into UAW talks with major investment goals as GM did in 2015. “We don’t have language in the contracts that guarantee job security anymore,” she said. “You get a good product that sells on the market. That’s your job security.”

Bucking the trend

The investment makes FCA stand out in the industry as U.S. sales are plateauing, some automakers are scaling back capacity and layoffs are displacing workers at Ford and GM. Even FCA announced last week that it was laying off 1,400 workers at its Belvidere, Ill., plant that builds the Jeep Cherokee.

By bucking the trend, Dziczek said, FCA’s investment in U.S. manufacturing will please the government, even though it isn’t closing any factories outside the U.S. Indeed, as a result of the investment, FCA said, production of the new Ram Heavy Duty will remain in Saltillo, Mexico, instead of moving to the Warren Truck plant in Michigan.

President Donald Trump was quick to praise FCA’s plan, thanking the company on Twitter and saying the U.S. is “where the action is.” Overall, the plan is expected to add around 6,500 jobs in southeast Michigan, with nearly 5,000 of them in Detroit and the rest at suburban assembly and part plants.

The Mack site would be “the first new assembly plant in Detroit in almost three decades,” said Mark Stewart, FCA’s recently hired COO for North America, during the announcement last week. “We anticipate starting construction in the second quarter. Our goal is to get the first three-row new Jeeps off the line before the end of 2020.”

The 4,950 jobs created at the Detroit plants would come with an expected average wage of approximately $58,000 a year, according to the city’s memorandum of understanding with FCA.

Power of persuasion

Detroit Mayor Mike Duggan said the city will have to use the power of “persuasion” with voluntary buyouts to gather the land.

Sandy Baruah, CEO of the Detroit Regional Chamber, pointed to projects by suppliers Flex-N-Gate and Sakhti Automotive in recent years as examples of Duggan engaging the auto world to bring jobs to the city.

Duggan “does not use hope as a strategy,” Baruah told Automotive News. “He’s been working this deal for quite some time. This is not something that FCA dropped in his lap the other day.”

Duggan and administration officials have had early discussions with all of the property owners about selling, but no transactions have taken place, Crain’s Detroit Business, a sibling publication of Automotive News, reported.

“I think most people realize this is a once-in-a-generational chance to change the economic fortunes of thousands of Detroiters,” Duggan said during last week’s announcement. “If somebody refuses to sell, we have no legal means to make them. That’s why this is such an enormous leap of faith on the part of FCA to trust us that we’re going to get this done.”

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