Monday, July 2, 2007

Detroit plant wins Chrysler's new SUVs

Jefferson assembly retooled for task

Early preparation has begun to retool Chrysler's Jefferson North Assembly Plant so the Detroit facility can be ready to launch the company's next generation of midsized SUVs as soon as late 2009, the Free Press has learned.

The successors to the Jeep Grand Cherokee and Dodge Durango will be assembled at the Jefferson North plant in Detroit, people familiar with the situation said.

The current Grand Cherokee is already assembled at Jefferson North, along with the Jeep Commander, which industry analysts said they believe will be phased out by the summer of 2009, if not earlier.

The Chrysler Aspen and Dodge Durango SUVs are currently assembled at the Newark, Del., assembly plant that will be shuttered by 2009 as part of the automaker's Feb. 14 turnaround plan.

Roger Benvenuti, a spokesman for Chrysler, declined to comment Friday.

The Free Press reported in early February that Chrysler's Jefferson plant could benefit from a major reinvestment if the Delaware plant closed and Durango production was reassigned.

Several analysts said it would be part of the Feb. 14 turnaround plan. But such a development was absent that day.

Instead, the day's news was dominated by the indication that DaimlerChrysler AG would sell the Chrysler Group.

Global Insight analyst Catherine Madden said she expects the new SUVs to launch in late 2009 at Jefferson North.

"It's going to be a pretty massive overhaul," Madden said of the plant. "They're real projects from everything we can tell. ... It is our expectation that they will be built at Jefferson North."

Such a project would mean a significant investment -- several hundreds of millions of dollars -- in the facility, Madden said, "which certainly gives the plant a stronger, brighter" future.

"Just some basic tooling stuff can be a hundred million," she noted.

By getting rid of the Commander, Chrysler would be freeing up space at Jefferson North for another vehicle.

The Free Press reported earlier this year that the company had issued bidding information to suppliers for a new Dodge crossover vehicle that would be built at Jefferson North and was believed to be the replacement for the current Durango.

Erich Merkle, director of forecasting for IRN Inc., said the next generation Durango and Grand Cherokee will share a platform that would probably be used for the replacement for the Chrysler Pacifica, which is assembled in Windsor.

"It might not be called the Pacifica, but there will be some sort of Chrysler variant in there," Merkle added.

"Whenever you have this change in the industry," he said, referring to Chrysler's turnaround plan, "there are always some plants that benefit from that, and then there are others that will lose."

Jefferson North, built in 1991, began production of the Grand Cherokee in January 1992. The plant, which currently employs about 2,400 people, is located within one of Detroit's poorest neighborhoods.

The Grand Cherokee is one of three supremely important vehicles in the Chrysler Group lineup, along with the minivans and the Dodge Ram. In 1999, during the heady days of the SUV business, the Chrysler facility underwent a $750-million expansion so the company could boost production of the Grand Cherokee.

Times have changed, though, and Chrysler has been hard hit by high gasoline prices and consumers' interest in more fuel-efficient vehicles.

Chrysler lost $680 million last year and about $2 billion in the first quarter of this year, a figure largely attributed to the cost of the turnaround plan.

A key measure of the plan includes eliminating 13,000 jobs over three years and closing the Delaware plant.

Beyond cutting costs, the company wants to re-create itself with more fuel-efficient engines and has announced plans to spend $3 billion on developing power trains that get better gas mileage.

Next year, the company plans to sell Aspen and Durango SUVs with hybrid engines.

All of those plans, however, were largely overshadowed by the indication that Chrysler would be sold.

In May, it was announced that private-equity firm Cerberus Capital Management would acquire 80.1% of Chrysler in a deal that is expected to be completed as early as next month.

Even with that announcement, Chrysler has moved forward with planned investments, including $730 million to build an engine plant in Trenton and $700 million to build an axle plant in Marysville.

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