Chrysler Changes Plans to Close Sterling Heights Assembly Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Fiat SpA (OTC:FIATY) (Turin, Italy) had been seeking a way to break back into the North American automotive marketplace for some time when the bankruptcy at the Chrysler Group LLC (Auburn Hills, Michigan) provided the company with an opportunity that was just too good to pass up. Fiat is now a part-owner of the new Chrysler and is using the struggling American automaker as an avenue to get the company's line of smaller, more fuel-efficient vehicles back into the North American game. Until now, exactly how and when Fiat was going to make its move into North America was still up in the air, but Chrysler announced Monday that it will be keeping the assembly plant in Sterling Heights, Michigan, open, after previously announcing the facility would close its doors by the end of 2010. The plant will be the launching pad for Fiat models in the U.S.

The Sterling Heights plant, which assembles the Dodge Avenger and Chrysler Sebring, will remain open while the automaker "refreshes and renews" both models. These modifications will supposedly include changes to the interiors, as well as changes to both the engines and transmissions in an effort to make the vehicles quieter. How does this connect to Fiat's models coming to America? Chrysler and Fiat are going to continue to produce the Avenger and Sebring, while figuring out exactly how they will design their respective replacements, which will be based on Fiat models.

Chrysler intends to develop a midsized car that will be based on Fiat's C-EVO frame and suspension and will have a Fiat-based engine and transmission. This particular frame is currently being designed for a European compact car but can be stretched to serve as a platform for a midsized car in the U.S. Initial plans are to introduce this new model to the North American marketplace within 18 months, which would put the car on the road by the middle of 2011.

This new model will probably be the first of several models that Chrysler will develop based on Fiat's successful models that have sold well in Europe. Chrysler intends to redesign several Fiat platforms for use in the U.S. as the struggling automaker remakes itself with smaller, more fuel-efficient vehicles that the company feels will do well here in the U.S.

These moves by Chrysler could mean a number of new jobs in the U.S. Chrysler will not only have to assemble the new models, potentially at plants that have been marked for closure or that are already closed, but will also have to manufacture parts for these models. Chrysler will probably look at retooling one of the company's engine and transmission plants to handle the different models' engines and transmissions once the plans for bringing the new models to market are finalized.

These moves could mean thousands of new jobs in states that have desperately struggled during the recession. Additionally, hundreds of millions of dollars would need to be spent retooling assembly plants, as well as engine and transmission plants, to accommodate the needs of the new models. These construction projects would provide much needed temporary construction jobs and would provide an influx of capital to regions that have suffered greatly, especially in Michigan, which is still reeling from the volume of automaker layoffs over the past several years.

The real question, at this point, is, "Will this actually do Chrysler any good?" Smaller, more fuel-efficient vehicles have not, traditionally, sold as well in the U.S. as larger vehicles, but times are changing, especially with the federal government mandating mile-per-gallon increases and reductions in emissions from automakers in the coming years. Chrysler, always the smallest of the Detroit-Three, has an uphill battle on its hands trying to complete with General Motors Corporation (Detroit, Michigan) and Ford Motor Company (NYSE:F) (Dearborn, Michigan) in the new small-car marketplace. But fighting GM and Ford for a niche in the American automotive market is nothing new to Chrysler, and possibly, with Fiat on its side, Chrysler can grasp a portion of the market and survive.

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