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By Deepa Seetharaman
4 Min Read
KOKOMO, Indiana (Reuters) – Chrysler Group LLC said on Tuesday it is looking to invest $843 million to improve its Kokomo, Indiana, plants to produce a new transmission and retain about 2,250 jobs.
Chrysler said the Kokomo improvements would push its total investment in U.S. facilities to nearly $3 billion since the automaker emerged from a government-funded bankruptcy under the management control of Italy’s Fiat SpA FIA.MI in June 2009.
U.S. President Barack Obama and Vice President Joe Biden visited one of the Kokomo plants Tuesday afternoon.
The trip was announced after General Motors Co’s GM.N initial public offering last week, which the Obama administration touted as a milestone in the auto industry’s recovery.
Chrysler came to the brink of liquidation in 2009 before a U.S. government-funded bankruptcy cut its operating costs and handed majority ownership to a union-affiliated trust fund and management control to Fiat, Europe’s sixth-largest carmaker.
“After a couple of tough years, this plant is now running at full capacity and that’s why I’m here today,” Obama said in his remarks to plant workers and reporters at the Kokomo facility.
Chrysler previously announced $343 million of Kokomo plant improvements for a new eight-speed automatic transmission and to add production capacity. It has also announced investments at other U.S. assembly, engine and casting plants this year.
Chrysler turned an operating profit last quarter and has been preparing for a public share offering in the second half of 2011. The U.S. government owns 10 percent of Chrysler.
Chrysler is in “preliminary, exploratory” talks with a number of financial institutions to refinance its debt, which bears a crushing interest rate of between 7 percent and 14 percent.
Part of that refinancing could come from at least $3 billion in low-cost loans Chrysler is seeking from the U.S. Department of Energy.
The new Kokomo investments remain pending a tax abatement decision by the Kokomo city council on December 13, Chrysler said. Kokomo is about 50 miles north of Indianapolis.
“For years, Kokomo has been at the center of our powertrain strategy and the potential of an additional investment reaffirms that position,” Chrysler Chief Executive Sergio Marchionne said in a statement.
The investment includes production of an advanced front-wheel drive automatic transmission for future Chrysler vehicles and includes installation of equipment and special tooling for the transmission plants and a casting plant.
Chrysler is partnering with Friedrichshafen, Germany-based ZF Group on the transmission. ZF will make its designs and technology available to Chrysler, the automaker said.
The automaker builds transmissions for its Jeep Grand Cherokee, Jeep Liberty, Dodge Dakota, Ram pickup trucks, Dodge Nitro, Dodge Charger and other vehicles in Kokomo.
Chrysler plans to introduce a series of smaller and more fuel efficient cars built on Fiat platforms to broaden a vehicle lineup that is too reliant on the large SUVs, pickup trucks and larger cars of recent years.
The automaker plans 16 new or broadly upgraded models under its revival strategy. The automaker has touted the introduction of a new Grand Cherokee this year as an example of improved designs and manufacturing. The Grand Cherokee was its first full 2011 vehicle redesign to go into production since the bankruptcy.
Additional reporting by David Bailey, editing by Gerald E. McCormick, Dave Zimmerman
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