The latest major piece of the Chrysler Group's $3-billion plan to build more fuel-efficient powertrains fell into place Friday.
The Auburn Hills automaker announced plans to build a $570-million engine plant in Mexico to produce its new family of V6 engines, dubbed the Phoenix.
It is the second announcement of a new engine plant by Chrysler in the past month and fits into the company's plan to pare its current four V6 architectures to one.
The other new Phoenix plant is being built next to Chrysler's engine plant in Trenton — a $730-million investment.
Chrysler is also building a new $700-million axle plant in Marysville.
The investments are part of the plan announced in February to return Chrysler to profitability by next year.
Paul Lacy, an analyst with Global Insight, said the investments will pay off for Chrysler.
“They need a way to get more mileage out of the vehicles and at the same time retain performance,” he said.
Chrysler is planning future announcements regarding powertrain investments, but a spokesman declined to comment Friday on the timing.
A likely spot to receive a cash infusion is Kokomo, Ind., Lacy said.
Chrysler already has a transmission plant in Kokomo where about 3,100 people work. In February, Chrysler and Getrag, a German transmission supplier, signed a nonbinding memorandum of understanding to develop a more fuel-efficient dual clutch.
News reports in Indiana have said that Getrag has already acquired land near Kokomo for a new facility. Lacy predicts the new investment will be between $500 million and $600 million and produce 700,000 units a year.
The new Mexico and Trenton plants combined will have the ability to crank out as many as 880,000 engines a year.
Chrysler has said the Phoenix engine will not be for Mercedes-Benz, the luxury carmaker of its owner DaimlerChrysler AG, which is in the process of selling 80.1% of Chrysler to Cerberus Capital Management, leaving Daimler AG with just under 20% of the U.S. automaker. There has been much speculation that the new Phoenix technology would benefit Mercedes.
“If we look at the volumes they are talking about on these programs … they can't all be going to Chrysler vehicles,” Lacy said. “It's impossible. I don't know where they would put them all. I would have to believe that Mercedes with their 20% stake is going to reap the benefits of some of this.”
The Mexico plant will be built in Derramadero, near Chrysler's Saltillo Truck Assembly Plant where Dodge Rams are built. Production is to begin in 2009. It will have 485 full-time employees.
Chrysler Executive Vice President for Manufacturing Frank Ewasyshyn joined Mexican President Felipe Calderón and the governor of the state of Coahuila Humberto Moreira at Los Pinos — Mexico's presidential home — for the announcement.
“Today's celebration commemorates an important milestone for the Chrysler Group because — through the recovery and transformation plan — we're investing in the international future of our company,” Ewasyshyn said in a statement. “This $570-million investment will have a positive impact on the regional economy. The Chrysler Group has a deep commitment to our Mexican operations with more than 60 years of history here, and we will continue that commitment going forward.”
