February 27, 2019

$4.5B Fiat Chrysler plan to add 6,500 jobs in Detroit area


Chad Livengood

Crain’s Detroit

  • FCA announces plans to convert Detroit engine plants into new assembly plant
  • Deal hinges on Detroit assembling 200 acres of land
  • FCA investing $4.5 billion, creating 6,500 jobs in Southeast Michigan

Fiat Chrysler Automobiles announced plans Tuesday that would add about 6,500 jobs in Southeast Michigan and open the first new auto assembly plant in Detroit in a generation.

The automaker plans to convert its Mack Avenue engine plants on Detroit’s east side into a new assembly plant, retool the Jefferson North Assembly plant and make new investments in three other plants in Warren and Sterling Heights.

FCA plans to spend $1.6 billion to build a next-generation Jeep Grand Cherokee, a new three-row Jeep SUV and plug-in hybrid at the Mack Engine complex, half of which has been idled since 2012.

For Detroit alone, the Auburn Hills-based automaker will add nearly 5,000 jobs between the Mack Avenue and Jefferson North plants. FCA plans to invest $900 million in retooling and modernizing Jefferson North, where workers assemble the Dodge Durango and Jeep Grand Cherokee.

Mayor Mike Duggan cautioned the deal is not done. The city of Detroit has committed to assembling 200 acres of land in the next 60 days adjacent to the Mack Avenue complex to provide FCA with more space for parking, new vehicle storage and parts deliveries.

“I think most people realize this is a once-in-a-generational chance to change the economic fortunes of thousands of Detroiters,” Duggan said at a news conference at Coleman A. Young Municipal Center.

Duggan said land owners would be offered voluntary buyouts. The city of Detroit has no power to seize private property for the private development through eminent domain.

The 200-acre footprint — bounded by St. Jean Street, Mack Avenue, Connor Street and Jefferson Avenue — does not include any residences, Duggan said.

“We’re going to do this without putting anybody out of their homes,” the mayor said, alluding to the Young administration’s controversial forced condemnation of the Poletown neighborhood in the early 1980s to help General Motors Co. build the Detroit-Hamtramck assembly plant.

Detroit will assemble and purchase the land on FCA’s behalf using taxpayer dollars as well as abate $12 million in taxes, “which in a $2.5 billion deal is pretty small,” Duggan said.

“The state is making a larger contribution on the tax break side,” the mayor added.

Michigan Economic Development Corp. CEO Jeff Mason declined to reveal details of the state tax incentives FCA will be offered through the Michigan Strategic Fund.

“We will use the tools available to us already in our tool kit to bring this project home,” Mason said.

About 170 of the 200 acres is under the control of the city of Detroit, DTE Energy, the Great Lakes Water Authority and the Moroun family, Duggan said.

Detroit will contribute 40 acres of city-owned land, including a section of St. Jean Street and its berm adjacent to a neighborhood between Mack Avenue and East Warren Avenue, said Tom Lewand Sr., group executive for jobs and economic growth for Duggan’s office.

The Moroun family owns 80 acres of the desired land that’s part of a vehicle shipping logistics center the family’s Crowne Enterprises built in 2017 after tearing down the former Budd Wheel plant.

Duggan said he was hopeful he could get businessman Matthew Moroun to sell the city the land his company just recently redeveloped.

“They’re business people with a valuable piece of land and it’s going to be a tough conversation,” said Duggan, who later added, “I’m expecting to get a deal.”

FCA’s desired footprint also includes 11 acres owned by the Great Lakes Water Authority, Lewand said. Between 40 and 50 acres of land at DTE Energy’s former Conner Creek facility is needed, including land with the old coal plant that is expected to be demolished later this year, he said.

Duggan and administration officials have had early discussions with all of the property owners about selling, but no transactions have taken place, Lewand said.

“We couldn’t get deals until we had the (Memorandum of Understanding) signed with the company,” Lewand told Crain’s.

In addition to the $12 million property tax break, the value of the land is Detroit’s taxpayer incentive for FCA to build the plant in Detroit.

“The land is our contribution — as it was in the Chrysler Jefferson North deal in 1991,” said Duggan, who was a deputy executive for Wayne County at the time.

“We’re negotiating — with the best I can — land swaps to reduce the amount of out-of-pocket costs,” the mayor said.

Duggan declined to disclose how much money he has budgeted for spending taxpayer dollars acquiring land that will be given to the global automaker.

“We won’t talk about the budget until the day it’s done,” Duggan told Crain’s.

FCA said it will spend $4.5 billion on the Mack plant and five other production facilities in Michigan.

“It’s been a long time since we’ve seen an investment this big and transformative,” Gov. Gretchen Whitmer said. “This is a generational investment in the state of Michigan.”

FCA company officials announced the new investments at a midday news conference Tuesday at the Coleman A. Young Municipal Center alongside Whitmer, Duggan, Evans, City Council President Brenda Jones and members of the United Auto Workers.

Mark Stewart, chief operating officer for FCA North America, said the automaker wants to begin construction during the second quarter of this year with a goal of churning out new three-row Jeep Grand Cherokees at the Mack Avenue plant by the end of 2020.

“We need everyone’s support so we can make that tight timeline,” Stewart said. “… And it’s going to take a community.”

Wayne County Executive Warren Evans said FCA could have built the new Jeep plant “in a field” — as was the trend in the auto industry for decades.

“It would have been so much easier than negotiating to do this,” Evans said. “But it wouldn’t be anywhere near as viable.”

At FCA’s Warren truck plant, the automaker plans to add 1,400 more jobs and increase its investment to assemble an all-new Jeep Wagoneer and Grand Wagoneer. FCA also assembles its Ram 1500 trucks at the Warren plant.

“FCA’s announcement of $1.9 billion dollars of investment and nearly 1,500 new jobs at Warren Truck, Warren Stamping and Sterling Stamping showcases the company’s future-focused strategy,” Macomb County Executive Mark Hackel said in a statement. “It is also a testament to the abilities of our talented workforce, who will now be charged with building exciting new products and advancing automotive technology and capabilities.”

The automaker said it would relocate production of its Pentastar engine from the Mack I engine plant in Detroit to the Dundee Engine Plant by the end of the third quarter this year. That retooling will require an additional $119 million investment in the Dundee plant, FCA said.

UAW Vice President Cindy Estrada said FCA’s expansion in Detroit will create more union jobs and a reversal of fortunes from Chrylser’s bankruptcy and federal bailout a decade ago.

“Ten to 15 years ago, this wasn’t the story of Chrysler,” Estrada said. “… This is such an opportunity for Detroit in the same way that FCA and the UAW workers came together to reimagine their company.”