Wisconsin Will Sue Chrysler to Halt Shutdown : Cites ‘Agreement’ to Keep Kenosha Plant Open

The state of Wisconsin will sue Chrysler Corp. in an effort to overturn the auto maker’s decision to close its Kenosha, Wis., plant, State Atty. Gen. Donald Hanaway said Tuesday.

“Chrysler made a legally enforceable agreement with the state of Wisconsin to build automobiles in Kenosha. We therefore recommend a lawsuit be commenced to enforce that agreement,” Hanaway wrote in a letter to Gov. Tommy Thompson. The contents of the letter were released at a news conference here.

Chrysler announced on Jan. 27 that it would close most of the former American Motors Corp. plant, throwing all but 1,000 of its 6,500 employees out of work. Chrysler purchased AMC for $2 billion last August.

In a prepared statement issued Tuesday, the car maker said Wisconsin had no legal grounds to sue. “As to their legal claims, our attorneys have come to the opposite conclusion, the state does not have a case,” the Chrysler statement said.

Chrysler’s announcement last month to close the nation’s oldest auto plant brought a swift reaction from the Wisconsin governor, who accused Chrysler Chairman Lee A. Iacocca of betraying an agreement the company had made to stay in Kenosha for three to five years.

“There’s no question in my mind there’s a breach of contract,” Thompson said last month.

Hanaway said Tuesday that he had examined company correspondence to the governor involving Chrysler’s acquisition of AMC, and that in any case, “a verbal agreement is as legally binding as any other contract.”

In announcing the plant closing, Chrysler said it was moving production of its popular Dodge Omni and Plymouth Horizon models to other plants.

In a news conference last week, Iacocca said it would cost $1 billion to bring Kenosha up to the same competitive standards as a new car assembly plant.