Chrysler’s $1-Billion Bet : The success or failure of its new Detroit plant may foretell the longevity of the No. 3 U.S. car maker and the future of old manufacturing cities.

Grandparents work the factory floor, the neighborhood groans with poverty and crime and relics from the Motor City’s better days--Hudson, Packard, Maxwell, Hupp--haunt the nearby streets like ghosts.

The scene conjures a stroll on the downward slope of U.S. industrial history. But Chrysler Corp., which has just erected a $1-billion auto assembly plant on this imperfect site, is gambling that the direction will instead be up.

The factory, which represents Chrysler’s repayment of a political debt, is in its countdown toward the scheduled January production of the new Jeep Grand Cherokee. And the stakes are high all around.

The Jeep is Chrysler’s most urgently needed vehicle as it seeks to reverse a worrisome drain of cash by early next year. For the workers, nearly as old as the neighborhood, success will bolster Chrysler’s ability to pay their pensions a few years hence. For hard-pressed Detroit, it will mean 2,100 jobs and validation that business can be done here.

“This is one of the few new industrial bastions in an urban area, and I’d imagine the world is watching,” said Aaron Taylor, 44, a Vietnam veteran who started work here at age 18 and is president of Local 7 of the United Auto Workers union.

“It’ll be the last one if it’s not successful. We intend to leave a legacy like no other.”

Chrysler has been closing plants and eliminating jobs for years, and this venture doesn’t mean growth but an effort to limit further job loss. Fewer people will work here than did before, and the new plant could eventually cost jobs in Toledo, Ohio.

But in Detroit you take what you can get. The only people building auto plants in this country lately have been the Japanese, and they’ve been doing it mostly in cornfields down South with younger, healthier, non-union workers.

Chrysler--smothered in political baggage from its 1980 bailout by taxpayers--broke all the consultants’ rules by building the new plant in the city. It not only encountered major toxic-waste problems and local political scandal, but inherited a work force whose average age is 51, one of the nation’s oldest collections of blue-collar employees.

“I’m 30, and some of these guys have been on the factory floor longer than I’ve been on the planet,” says James Anderson, a training subcontractor assigned to teach the old dogs new tricks.

The troubled company and its workers are gambling that an ambitious retraining project, a more egalitarian labor agreement, better plant-floor ergonomics and broadened applications of automation will help them survive.

Despite his advancing age, skilled tradesman Thomas Catman, 61, insists that “work’s getting easier.”

If history is made here, it won’t be the first time. Abutting the property to the north is a replica of Independence Hall, which once served as headquarters and factory for the defunct Liberty Motor Car Co. Liberty made cars there until 1924.

On the parking lot across Conner Avenue stood Hudson Motor Car Co., which went into business in 1912 and went out in 1957. Down Jefferson Avenue several blocks was Hupp Motor Car Co., 1909-1941, builder of the Hupmobile. A couple of miles to the northwest stands the remains of Packard Motor Car Co., a warehouse since the mid-1950s.

And until a year ago, the oldest working auto plant in America stood on the approximate site of the new one. It was part of a complex that once employed 16,000 workers and had churned out Chalmer, Maxwell and Chrysler cars and trucks since 1905, with a World War II changeover to make engines for the Sherman tank.

Part of the old complex still awaits demolition, and many believe that Chrysler itself--the most vulnerable of the Big Three U.S. auto firms as they stagger through the industry’s worst year--is threatened with the same eventual fate. In any case, the new factory is a key step in Chrysler’s scramble to dodge the final wrecking ball.

All that was saved from the rubble of the old place were two handsome chandeliers that date to Chrysler’s introduction of the dramatically styled, Art Deco-inspired 1934 Chrysler Airflow, also built here. The fixtures now grace the new lobby, a reminder of Chrysler’s intermittently proud past.

These days, a few lonely, unpainted Jeep bodies snake slowly through the plant on a colorfully painted conveyor system that guides them through a gauntlet of robots. Technicians are massaging the system so that the welding and other tasks demanded of the robots--hanging doors, installing windshields and loading batteries, for example--will be done with precision when production starts for real.

Skilled tradesmen in their 50s and 60s continue with their 12th month of full-time training in how to operate and maintain the computer-driven technology that will link and control thousands of repetitive tasks in the plant.

“It’s what they call menu-driven,” explains 52-year-old electrician George Wyscaver, pausing from his job-site lesson on how to maintain and repair the under-body deadener booth, which automatically coats the undersides of passing car bodies right after they are painted.

“We had basic PLC (programmable logic control) in the old plant for over 10 years, but this is fifth generation. For us, it will mean a lot more monitoring of the system than wiring it or fixing it. We’ll be half technician and half electrician.”

Adds Jim Wheeler, 62: “Before, when we had a breakdown, we had to go hunt for it. Now, we just go to the control room and they tell us where it is.”

The robots and other automation are extra-important in this auto plant because of the age of the workers, who will number 2,100 when production reaches two shifts next year. They are an extreme example of one of the U.S. auto industry’s big problems: The older work force is said to add $500 to the cost of building a car because of the medical expenses they incur as they age.

In the 20 months since Chrysler’s old Jefferson Avenue plant closed, says the UAW’s Taylor, about 90 of 1,700 laid-off workers have died from heart attacks, strokes and other familiar ills that plague America’s middle-aged blue-collar workers.

By contrast, Japanese-owned auto plants that have opened in Ohio, Kentucky, Tennessee and nearby states boast younger, nimbler workers. At Toyota’s plant in Georgetown, Ky., the average employee is 33 and can presumably jump in and out of half-built cars all day long.

“It might turn out to be a giant liability,” says Maryann Keller, automotive analyst at Furman Selz Inc. in New York. “We all know that the way to go is to screen 100,000 young men whose voices have just changed and who are all computer whizzes.”

Before long, the Jefferson plant workers will begin to enter the company’s enormous retiree population: The company has as many pensioners as active workers. But their stake here is ongoing, because among the issues ultimately riding on the venture is Chrysler’s ability to pay the pensions.

The new Jeep’s success seems more urgent than Chrysler’s other current gambles, such as sinking $1 billion into a new technology center that opened last month north of Detroit. With cash rapidly draining from the company, the new Jeep--Chrysler’s most important vehicle along with the minivan--is being counted on to reverse the money outflow early next year. Analysts expect it to sport a $25,000 price tag.

“All I know is that Jeep is the highest-margin unit we have, and every time we build one we’re going to get X-thousand dollars, and I can hardly wait,” says Lee A. Iacocca, Chrysler’s chairman and chief executive.

Because of the severe car-making overcapacity that encircles the domestic auto industry like a noose, Chrysler has been second-guessed by Wall Street for building the plant at all. But once it decided to build, why here?

“The fact is, Chrysler had no moral choice,” analyst Keller says. “It would have been almost unconscionable for them to pull out of Detroit.”

The decision was a legacy of Chrysler’s taxpayer bailout engineered by Democrats in Congress, the White House, the city of Detroit and state of Michigan, among other states, 11 years ago. It was a campaign on behalf of the nation’s industrial sector, its troubled urban areas, the working class and blacks in particular, of whom Chrysler is the nation’s largest private employer. The new plant’s work force is 70% minorities.

Chrysler paid off the government-guaranteed loans long ago. But the episode left it with political debts that, along with Chrysler’s continued fragility, still tend to align the auto maker with urban, blue-collar, union, black and other traditionally Democratic interest groups on issues ranging from national health care to trade protectionism.

It’s not as if Iacocca is saving America’s cities. He ordered wholesale plant closings in Michigan, Wisconsin and elsewhere during the 1980s, and is now moving 7,000 engineers out of Chrysler’s inner-city headquarters to the elaborate new technology center 40 miles north of Detroit. Many assume that the rest of the headquarters staff will follow.

The new Jefferson assembly plant, meanwhile, will leave hundreds of former workers on the street because it is about 35% less labor-intensive than the old plant. And the new Detroit plant will probably lead to the eventual closure of an old Toledo assembly plant that builds three Jeep models and employs 4,900.

Such steps, coupled with Iacocca’s fabled multimillion-dollar paychecks and a downturn in Chrysler’s fortunes, have turned the onetime American folk hero into something of a villain to those hurt by the company’s troubles. But here, Chrysler says, a debt is being at least partly repaid.

“It would have been a lot easier to do this on a greenfield (rural) site,” says Michael M. Glusac, director of government affairs at Chrysler. “But there were political aspects, there were racial aspects. This was the right place to do it for a lot of reasons.”

Iacocca, once wooed as a Democratic candidate for President but now a self-described Republican who voted for his “good friend” George Bush, says:

“We could have left Detroit, and it would have been a bigger mess than it is now. It was a close call. Do we need a billion-dollar plant in a ghetto? Should we build, like the Japanese do, in a cornfield? . . . It falls into what you think your responsibilities are to your community. But in the end, we’ll only be known if we build good cars, make profits and return the investment to shareholders. The plant’s got to work.”

But urban factory pioneers face problems that the cornfield planners don’t. Detroit Mayor Coleman Young went to extreme lengths to persuade Chrysler to stay, triggering a local scandal when city officials assembling extra acreage for the plant paid some property owners 20 times what their parcels were worth. Total cost to Detroit of tax breaks and other aid was estimated at $436 million, or more than $200,000 a job.

Meanwhile, bulldozers uncovered toxic wastes dating back 85 years to the days when solvents, lead-based paint, arsenic and other nasty materials were simply poured into pits in the ground. More than 80 underground storage tanks were leaking chemicals.

The worst stuff was hauled to toxic-waste dumps. But the gentle, newly landscaped mounds now surrounding the plant consist of excavated dirt that environmental regulators wouldn’t allow to be hauled off the site without costly precautions. A special drain system and 18-inch clay cap now underlie all 280 acres to funnel any toxic residue to a treatment facility and away from the ground water.

Chrysler’s job is to turn out four-wheel-drive utility vehicles that are better than anyone else’s. To play the hand it has dealt itself, the company and the UAW assert that they have pulled together all the hard lessons learned from the Japanese, the consultants and others about design, engineering, technology, manufacturing, labor-management relations and “working smart.”

The plant is about half the size of the one it replaces and will build 720 Jeeps a day with one-third fewer workers per vehicle. The smaller area not only saved money but forces the company into more efficient assembly practices, says plant manager Tom Breneiser, making it Chrysler’s first opportunity to apply the “lean production” system conceived by Toyota.

Hoping to avoid production disasters it and other U.S. auto firms have faced by using too much cutting-edge technology, Breneiser says the plant marks an effort to “grow” proven technology. “It is not a test lab.”

The workers, meanwhile, will no longer have to lift 360 batteries a day or hang that many 25-pound doors. The overhead contraptions that carry vehicles tilt 37 degrees toward the workers when they install components from below. The little welding that’s not done by robots will be done with aluminum guns, not heavier steel ones.

Indeed, all the brainpower directed at making U.S. manufacturers more efficient in the past decade has made strong backs far less important than strong minds. Meanwhile, the older workers are savvier than younger ones, more settled in their lives and more reliable, the 44-year-old Breneiser argues. Training leaders say the gray-haired electricians at the Jefferson Avenue plant take half the time than less experienced workers need to learn the same material.

“You take 26 years of experience and add 1,700 hours of training and when you add it all up, I come out positive,” Breneiser says of his workers.

Ironically, age is an issue that increasingly confronts Japan’s younger auto companies back home. Faced with severe labor shortages, Toyota has lately been calling back retired auto workers and changing the demands of the factory floor to accommodate them, says analyst Keller, a student of manufacturing practices.

“Plant-floor ergonomics have come a long way,” she says. “If the production system is geared to the older workers, it shouldn’t be that dramatically more expensive.”

Electrician Bernard Bawlowski, 54, has more than 30 years with Chrysler and could retire today. But he will get a bigger pension if he stays on, and he likes the new plant and all the training.

“We haven’t had much training before. We just learned on the job,” Bawlowski says. “Just give me a job, and I’ll do it to the best of my ability.”

AILING AUTO EMPLOYMENT

Ever since the decade’s auto employment peaked in 1985, the number of workers in America’s automobile plants has declined steadily, with particularly drastic reductions between 1989 and 1990. Source: Bureau of Labor Statistics