Chrysler Group LLC has begun discussions with the federal and Ontario governments to seek financial assistance for an investment of more than $1-billion to retool a plant in Windsor, Ont. for a new generation of minivans.
“This commitment that we’re making is a multibillion-dollar commitment,” chief executive of Chrysler and Fiat SpA Sergio Marchionne told reporters Monday at the North American International Auto Show in Detroit.
He said he would meet with federal and Ontario officials Monday and Tuesday in Detroit to discuss the proposal.
The Chrysler plan comes amid a flood of investments in the southern United States and Mexico that have revived the debate about whether incentives offered by Canadian governments are sufficient not only to compete with those two areas for new auto investments, but to retain existing plants in Canada.
The potential Chrysler investment will be a key test of the governments’ willingness to offer incentives at a time when they are trying to slash deficits.
The two governments contributed $2.9-billion to the bailout of Chrysler when it went into chapter 11 bankruptcy protection in 2009.
Another critical element in the discussion is the importance of the Windsor Assembly Plant, which has been cranking out minivans on three shifts for almost three decades. The plant and its 5,090 jobs are a major economic engine and generate thousands of spinoff jobs at suppliers and elsewhere in the economy.
Mr. Marchionne said any financial help would be what he calls a “partnership” and said there are examples from Brazil and Mexico that demonstrate that governments want auto industry investments to continue.
“The dialogue has started,” he noted, but he would not say how much financial help Chrysler is seeking or what percentage of Chrysler’s investment the governments would be asked to finance.
The minimum investment is $1-billion for a new minivan platform – or basic underbody – he said.
“The economic package which supports the investment, which is large and will represent in totality in excess of anything I’ve invested in any plant in the United States,” he said, “is something that has to be discussed with the authorities as to find out whether they think it’s a desirable thing for Canada to have. It’s that simple.” He also noted labour costs remain higher in Canada versus the U.S.
The auto maker is in the midst of deciding on a replacement vehicle for the minivan.
Labour costs, the nature of the government partnership and other factors will all play into the final decision, he noted.
“I’ve got to make sure that the environment and the conditions that support the investment are adequate to ensure our proper return on capital,” he said.
A new minivan could be on the road within 24 to 30 months, he said, adding that the styling of the vehicle is 95-per-cent complete.
Chrysler repaid $1.7-billion in government loans, plus $238-million in interest. The governments also received $12-million (U.S.) in interest from the old Chrysler, another $125-million from the sale of shares in Chrysler Group to Fiat SpA, which is now the majority owner of Chrysler and $12-million in other proceeds.
That leaves about $800-million (Canadian) that will not recovered.
The loans from the two Canadian governments ensured that Chrysler’s two Canadian assembly plants – the other one is a large-car assembly plant in Brampton, Ont. – became part of the new company instead of being liquidated as some assets of old Chrysler were during the bankruptcy protection in 2009.
Chrysler’s 1.8 million U.S. sales last year were its highest since 2007. Chrysler sold 244,247 Dodge Caravan and Town and Country minivans in the United States and 55,157 in Canada.