Chrysler, Mitsubishi to Build Plant in Illinois

Chrysler and Mitsubishi Motors of Japan said Monday that they will build a $500-million plant near Bloomington, Ill., to produce small cars together beginning in 1988, but they warned that they have no plans to hire members of the United Auto Workers for the project.

The joint venture, to be called Diamond-Star Motors, is expected to produce 180,000 small cars in time for the 1989 model year for sale both by Chrysler and Mitsubishi dealers in the United States. The venture’s 2-million-square-foot plant, to be designed and managed by Mitsubishi officials, will be built on a 636-acre site just outside the towns of Bloomington and Normal, in central Illinois.

Chrysler and Mitsubishi will each own 50% of the joint venture, which will employ about 2,500 workers on two shifts and produce a new line of small, two-door and four-door specialty models, officials said.

The two firms chose Illinois as the site for the joint venture over other Midwestern locations because the state gave them the best package of incentives, Chrysler Chairman Lee A. Iacocca said. And he added that Chrysler will be seeking similar incentives for its existing assembly plant in Belvidere, Ill., in coming meetings with state officials.

The project will be the second joint car-building venture in the United States between domestic and Japanese auto makers. General Motors and Toyota began producing small, Japanese-designed cars--now sold as Chevrolet Novas--at a former GM plant in Fremont, Calif., last December.

But while Chrysler’s hourly workers are represented by the UAW, Iacocca said Monday that the two companies have not made any promises to the union that it will be allowed to represent Diamond-Star’s work force. He said it will be up to the workers, after they are hired, to determine whether to join the UAW.

Toyoo Tate, president of Mitsubishi, added that the joint venture would hire locally in the Bloomington area starting in the summer of 1987 and that it wouldn’t make any special provisions to hire laid-off union workers from other Chrysler plants. The attempt by Diamond-Star to become a non-union operation runs counter to the trend elsewhere in the auto industry, where several new projects announced by domestic and Japanese firms have established cooperative relationships with the UAW before they have opened. Mazda has agreed to have the UAW represent the workers at its first U.S. assembly plant when it opens in 1987, and GM’s new Saturn small-car project in Tennessee is expected to hire much of its work force from a pool of GM employees. And the GM-Toyota joint venture, after some initial wrangling between Toyota and the UAW, has hired many former GM workers.

But a UAW spokesman insisted that the union was not concerned by the statements made by Iacocca and Tate, adding that UAW officials still believe that the two companies will agree to union involvement at the joint venture. The spokesman said that there was no secret deal between the union and management on the issue but noted that “there is every expectation that this will be a UAW shop, and that expectation is held on all sides, including by Chrysler and Mitsubishi.”

He said the union sees an “exact parallel” between the current situation at the Chrysler-Mitsubishi joint venture and what happened at the GM-Toyota project. There, the UAW won the right to represent the work force after the union applied some pressure on GM to persuade Toyota to agree to a union shop.

“I’m not implying there is any secret deal, but I believe it is the intention of Chrysler and Mitsubishi to have the union involved,” the spokesman added.

Separately, Iacocca said the joint-venture cars will initially include just 40% domestic content, with 60% of the parts, including engines and transaxles, imported from Japan. After more local suppliers are brought into the project, he said, the domestic content in the vehicles will rise to 60%. He added that the joint venture should create about 9,000 supplier jobs in the United States.

But the announcement by Iacocca of a joint venture with a Japanese firm was somewhat ironic, since he had been the biggest critic of GM’s decision to form a joint venture with Toyota. He had argued that the GM-Toyota deal would cost American jobs because its cars would use fewer domestic parts than the all-American small cars they they replaced.

Still, Iacocca said Monday that he could “only gripe so long” about the GM-Toyota joint venture and the Reagan Administration’s free-trade policies before he was forced to implement an Asian strategy of his own. Along with establishing a joint venture, Chrysler has also dramatically increased its imports of small cars from Mitsubishi.

“The death of the all-American small car has been well documented by now,” Iacocca said.