January 9, 2017 / 4:04 AM / 7 months ago

Fiat Chrysler to add U.S. jobs as Trump puts spotlight on industry

FILE PHOTO: An assembly line with 2014 Ram 1500 pickup trucks is seen at the Warren Truck Plant in Warren, Michigan, U.S. on September 25, 2014.Rebecca Cook/File Photo

DETROIT (Reuters) - Fiat Chrysler Automobiles (FCHA.MI) (FCAU.N) said it will invest $1 billion to modernize two plants in the U.S. Midwest and create 2,000 jobs, and possibly move production of a Ram heavy-duty pickup truck to Michigan from Mexico.

FCA Chief Executive Sergio Marchionne said on Monday the decision to retool factories in Ohio and Michigan to build new Jeep sport utility vehicles, including a pickup truck, "was in the works and has been in the works for a long period of time."

But he also told reporters at the Detroit auto show that uncertainty over U.S. President-elect Donald Trump's trade and tax policies could lead auto makers to delay investments in Mexico.

"The reality is the Mexican automotive industry has now for a number of years been tooled-up to try and deal with the U.S. market. If the U.S. market were not to be there, the reasons for its existence are on the line," Marchionne said.

Trump has threatened to slap new taxes on imported vehicles and criticized automakers including Ford Motor Co (F.N), General Motors Co (GM.N) and Toyota Motor Corp (7203.T) for building vehicles in Mexico.

FCA's investment decisions were not related to Trump's recent attacks on the auto industry, according to people familiar with the company's moves. FCA had previously said it would expand truck and SUV production in the United States, though the $1 billion investment figure and creation of 2,000 jobs are new details.

A person familiar with the situation said Marchionne wanted to get out those details in case FCA encountered criticism from Trump. The person said FCA executives did not confer with Trump before making the decision.

FCA's announcement also highlighted the auto industry's keen interest in getting relief from tough fuel economy rules enacted by the outgoing Obama administration.

General Motors Co (GM.N) Chief Executive Mary Barra on Sunday said tax reform and "streamlining regulations ... are just two areas that would be extremely beneficial" for Trump to address. Trump has criticized GM for building cars in Mexico while laying off workers in the United States.

Barra, who is on an advisory committee to Trump, told reporters that decisions about where to build specific vehicles are made "two, three four years ago". Overall, she said of Trump, "we have much more in common than we have different."

Touting Investments

Fiat Chrysler's announcement landed as global auto industry executives gathered for the annual auto show in a climate of growing uncertainty about the trade and regulatory policies the new Republican administration will pursue.

Trump, who will be inaugurated on Jan. 20, has talked about rolling back environmental regulations, and supporting corporate tax cuts - moves automakers would welcome.

He has just as explicitly warned that he will raise the costs of importing vehicles from Mexico, a policy industry executives said could hurt their businesses. Most major U.S. automakers have substantial vehicle making operations in Mexico, as well as complex networks of parts makers that supply their U.S. factories in states such as Ohio and Michigan.

Many automakers are using the annual North American International Auto show in Detroit, which started on Saturday, to tout investments in the United States.

Daimler AG (DAIGn.DE) Chief Executive Dieter Zetsche on Sunday said the German automaker planned to invest another $1.3 billion to expand sport utility vehicle (SUV) production at a factory in Alabama.

Hinrich Woebcken, chief executive of the North America Region for German automaker Volkswagen AG (VOWG_p.DE), told Reuters on Sunday the automaker plans to invest $7 billion in the United States between 2015 and 2019 and will start building its new Atlas SUV in Tennessee later this year.

Volkswagen has had a plant in Mexico for 50 years and it is not shifting any jobs to Mexico from the United States.

"We do not make our investment decisions based on administrative cycles. Our business is really an 8-, 12-, 14-year horizon when we look at investments," Woebcken said on the sidelines of the Detroit auto show.

Playing Up u.s. Investments

Since Trump's election, automakers and other companies have played up their investments in the United States.

Last week, Ford scrapped plans to build a $1.6 billion plant in Mexico and invest $700 million in a factory in Michigan. Ford will still move production of Focus small cars to Mexico, but will cut total production of the cars by consolidating their assembly in an existing Mexican plant.

FCA said a plant in Warren, Michigan, near Detroit, would make the Jeep Wagoneer and Jeep Grand Wagoneer SUVs, while a Toledo, Ohio, factory would produce the Jeep pickup.

The company said the production plans in Ohio and Michigan were "subject to the negotiation and final approval of incentives by state and local entities".

U.S. consumers have increasingly shifted toward SUVs and pickup trucks and away from sedans in recent years, as gasoline prices have remained relatively low.

A year ago, Marchionne said FCA would cease production of two sedans and focus on SUVs and pickups.

Marchionne said in a statement on Sunday that the lineup changes were due to that consumer shift.

"We continue to reinforce the U.S. as a global manufacturing hub" for SUVs and pickup trucks, he added.

Reporting by Nick Carey, David Shepardson and Bernie Woodall; Editing by Joseph White and Tiffany Wu

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