Tax relief OK'd for Chrysler upgrade

Eric Morath / The Detroit News

DETROIT -- The City Council approved a $22.8 million tax exemption for Chrysler LLC on Tuesday, clearing the way for the automaker to invest $373 million to upgrade its Jefferson North Assembly Plant on the city's east side.

Chrysler's investment would create 419 new jobs, and the plant updates are expected to be completed in June 2010, according to documents filed with the city. The planned improvements will allow Chrysler to produce the next generation of the Jeep Grand Cherokee and two other unnamed models at the plant.

The City Council unanimously approved the measure without discussion. The 50 percent tax exemption is valid for 12 years, beginning in 2009. Chrysler is seeking a tax abatement on $280.6 million of its investment, which would be spent on machinery and equipment.

The plan to add jobs comes three months after the company eliminated the 900-person second shift, citing falling sales of the sport utility vehicles that plant produces.

In city documents, Chrysler said the improvements may allow two shifts to run at the plant, depending on market conditions. If a second shift were added, employment at the plant could increase to 2,500 workers from 1,531.

Chrysler applied for the tax exemption in October. In March, the council challenged Chrysler with at least 12 questions, asking about its plans to hire city residents and why previous tax breaks have failed to keep automotive jobs in Detroit.

City Fiscal Analyst Irvin Corley Jr. said that after repeated questioning, the company had addressed the city's concerns. Chrysler will pay $9.7 million in additional tax revenue over the life of the exemption, he said.

"The additional revenue was important to council," Corley said. "As was Chrysler's commitment to hiring Detroiters."

In Corley's report to the council, he wrote that the "investment would help Chrysler to be more competitive in the global auto market place" and allow the automaker to produce up to four different models of the same assembly line.

"Today's council action reinforces the long-standing partnership between Chrysler LLC and the city of Detroit," said Patrick Lindsey, Chrysler's senior manager for state relations. Improvements to the plant "will enable us to produce a new generation of world-class vehicles in Detroit."