Fiat Chryslers’ $4.5 Billion Investment In Michigan: What Does It Mean For The Company?

Fiat Chrysler Automobiles (FCAU) has announced that it will be investing $4.5 billion into its Michigan manufacturing plants to build the Jeep Grand Cherokee and a new Jeep SUV as part of its industrialization plan.

The company will expand its Mack Avenue Engine factory into a new assembly plant for the vehicles, adding 6,500 new jobs to the area. Fiat Chrysler also said it will increase production at five other plants in the state.

“Three years ago, FCA set a course to grow our profitability based on the strength of the Jeep and Ram brands by realigning our U.S. manufacturing operations,” Mike Manley, CEO at FCA N.V. said in a statement. “Today’s announcement represents the next step in that strategy.

“It allows Jeep to enter two white space segments that offer significant margin opportunities and will enable new electrified Jeep products, including at least four plug-in hybrid vehicles and the flexibility to produce fully battery electric vehicles.”

The investment made in Michigan will grow the company’s core product lines while also allowing for the electrification its Jeep vehicles, Manley said. The investment is a move to become a stronger player in the three-row SUV market, which Manley said is rapidly growing and lead by GM’s Tahoe, Yukon, and Escalade.

From the investment, a total of $1.6 billion will be earmarked to convert the Mack Avenue Engine Complex while $900 million will be used at its Jefferson North Assembly plant for retooling and modernization for the production of the Dodge Durango and next-generation Jeep Grand Cherokee.

A total of $1.5 billion will be dedicated to the production of the Jeep Wagoneer and Grand Wagoneer as well as for the Ram 1500 Classic. The company also said it will move the production of the Ram Heavy Duty from Mexico to Warren, Michigan.

Plus, all three Detroit production plants will build plug-in hybrid models of the Jeep vehicles with the capacity to build fully-electric vehicle models long-term.

An additional $400 million will be used at the company’s Sterling Stamping and Warren Stamping plants for increased production and $119 million will help to move its Pentastar engine production to its Dundee Engine Plant by the third quarter of 2019.

Detroit has 60 days to meet Fiat Chrysler's terms for the its Memorandum of Understanding that will require the acquisition of the property necessary for the Mack plant construction.

Shares of Fiat Chrysler stock wee down 1.04 percent as of 3:45 p.m. ET on Tuesday.