Sergio Marchionne, CEO of Chrysler, sent out an email to employees to "plainly" tell them that, contrary to what Mitt Romney had said, Jeep production is not going to China.
Chrysler CEO Sergio Marchionne said on Tuesday the company will never establish full production of the Jeep Wrangler outside the United States, and he strongly restated the automaker's promise that it will not move existing U.S. production of Jeeps to China.
In an email to Chrysler employees, Mr. Marchionne said he felt obligated to again address the company's production plans.
Plainly, Chrysler Group LLC will continue to build Jeeps in the United States, he said.
“Jeep assembly lines will remain in operation in the United States and will constitute the backbone of the brand,” Mr. Marchionne said. “It is inaccurate to suggest anything different.”
Chrysler's plans for expanding the Jeep brand got sucked into the political tornado whirling about the auto industry last week when Republican presidential candidate Mitt Romney, while speaking in Defiance, seized on a misrepresentation of a Bloomberg story and suggested that Chrysler was considering moving all existing Jeep production to China.
Chrysler officials quickly refuted the report, saying the company had no intention of moving existing production to China. What the the Bloomberg story actually said was that Fiat SpA, Chrysler's parent company, was working toward building Chinese-market Jeeps in China as the company tries to expand its business there. China has become the world's largest auto market.
Since the Defiance event, Mr. Romney has tweaked his line of attack, but he is still using the story in television ads that attack President Obama over the auto bailout, saying he “sold Chrysler to Italians who are going to build Jeeps in China.”
Chrysler has invested big money in several U.S. assembly plants in recent years, including the Toledo Assembly Complex. That plant, which builds the Jeep Wrangler and will build the Jeep Liberty successor, received $500 million. Chrysler also said it has invested more than $1.8 billion at its Detroit-area plant that has built the Jeep Grand Cherokee since 2009.
“With the increase in demand for our vehicles, especially Jeep-branded vehicles, we have added more than 11,200 U.S. jobs since 2009,” Mr. Marchionne said. “Plants producing Jeep-branded vehicles alone have seen the number of people invested in the success of the Jeep brand grow to more than 9,300 hourly jobs from 4,700. This will increase by an additional 1,100 as the Liberty successor, which will be produced in Toledo, is introduced for global distribution in the second quarter of 2013.”
While Chrysler is considering building some Jeeps in China, it says U.S. jobs would not be affected. In his note to employees, Mr. Marchionne said expanding the customer base for Jeep vehicles is something that can only be done by establishing local production.
If Chrysler does that, it wouldn't be anything revolutionary.
“Chrysler has been building Jeeps in China since 1987,” said Aaron Bragman, a senior automotive analyst at IHS Automotive. “It only ended in 2009 when [Chrysler] dissolved all their joint ventures internationally because of the bankruptcy. This isn't starting to build Jeeps in China; this is a restoration of a business they arleady had.”
It was actually American Motors Corp. that first established Jeep in China in 1984. When Chrysler bought out AMC, it continued the existing arrangement.
Jeep currently exports U.S.-made vehicles to China, which is Jeep's largest market outside of North America. Last year, Jeep sold 22,294 vehicles in China. The company is expected to exceed that this year. But the vehicles it sells there face steep tariffs that can drive up their price significantly.
Mr. Bragman also said automakers generally like to build vehicles where they sell them for other reasons, including avoiding issues related to currency exchange rates.
One need not look any farther than Ohio to see an example of that. Honda has for years built Accords and Civics for the North American market in Ohio.
“Building [Jeeps in China] makes economic sense for a number of reasons,” Mr. Bragman said. “That and Chrysler couldn't build more Jeeps for export in the U.S. if they wanted to. Everyone is at capacity. In Toledo, they're running over capacity for the Wrangler.”
Jeep wants to sell 800,000 vehicles worldwide by 2014, and Mr. Marchionne said U.S. production is critical to that. Since 2009, U.S. production of Jeep models has nearly tripled.
“Jeep is one of our truly global brands with uniquely American roots. This will never change,” Mr. Marchionne said. “So much so that we committed that the iconic Wrangler nameplate, currently produced in our Toledo, Ohio, plant, will never see full production outside the United States.”
That commitment means Chrysler will not fully build and assemble Wranglers outside America. The automaker does currently ship low volumes of what the industry calls “knock-down kits” for final assembly in Egypt. Mr. Bragman said that's fairly common in the automotive industry, and the kits are not equitable to full-scale production plants. Parts would still have to be made and partially assembled elsewhere.
“That doesn't take any jobs away from anyone else,” Mr. Bragman said.
In Italy Tuesday, Mr. Marchionne said a totally new Jeep model would be built in Italy for the European market.
The new Jeep model would be smaller than any current Jeep model.
That announcement was part of Mr. Marchionne's discussion of a four-year plan for Fiat, which like other auto companies, has seen European sales drop dramatically over the last five years.
Contact Tyrel Linkhorn at: email@example.com or 419-724-6134.
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