Chrysler to Invest $1.3 Billion in Detroit Manufacturing Plants
Chrysler Corp. said Wednesday that it will invest $1.3 billion in six Detroit plants over five years, increasing its truck-making capability and boosting the city’s economic development efforts.
The biggest investment would be $750 million to expand its 6-year-old Jefferson North assembly plant. The factory produces the popular and highly profitable Jeep Grand Cherokee sport-utility vehicle.
The moves are likely to create several hundred jobs, Chrysler Chairman Robert Eaton said in making the announcement.
The spending is part of the company’s long-range strategy to increase its worldwide car and truck production from 2.9 million vehicles last year to more than 3.75 million by 2000 without building new factories.
“This is one little step,” said Eaton.
The investment is also seen as a strong statement by Chrysler that it believes the demand for light trucks--sport-utility vehicles, minivans and pickups--will continue to grow. And it is a vote of confidence in Detroit, where Chrysler remains the biggest industrial employer.
“It shows they are bullish about their future prospects and committed to Detroit,” said Bear Stearns analyst Nicholas Lobaccaro.
Chrysler, which reports first-quarter earnings today, has been piling up strong profits in recent years on the strength of brisk light-truck sales. Trucks now make up 70% of Chrysler’s sales.
Some analysts have worried about Chrysler’s future profits because sales of high-priced trucks appear to be slowing at the same time that competition, particularly from the Japanese, is increasing.
“The growth in trucks is going to be slower and the segment will be more crowded,” said David Healy, an analyst for Burnham Securities. “But it’s still a better place to be than in the mid-size passenger car market.”
Chrysler said it will add a body and paint shop to the Jefferson plant, giving it the capability to boost production significantly. Analysts estimate yearly production could grow from 300,000 vehicles to 375,000.
The company, which runs three shifts at the plant, has been under pressure for years to meet demand for the pricey Grand Cherokee. Sales were up 10% last year but have risen only 1.4% in the first three months of 1997.
A redesigned Grand Cherokee is scheduled to go into production in August 1998, and the changes at the plant are expected to help meet demand for the revamped vehicle.
Chrysler also said it will invest $300 million to increase parts production at an axle plant and $150 million to add capacity and equipment to a new truck engine plant.
The auto maker is also spending $100 million to increase production at a glass plant, $10 million on its Plymouth Prowler plant and $3 million at a second engine plant.
Eaton said the investments represent a commitment by Chrysler to Detroit’s revival, and he praised Mayor Dennis Archer for creating an environment conducive to economic development.
The city of Detroit contributed to the federal bailout of Chrysler in 1980 even as the auto maker was closing plants here and elsewhere.
“Any additional investment in Detroit is music to my ears,” said Archer. “What we heard from Chrysler this morning sounds like a symphony.”
As evidence of Detroit’s turnaround, Archer cites plans for two new sports stadiums downtown, approval of casino gaming and GM’s relocation of its headquarters to the Renaissance Center downtown.
