Chrysler Investing $1.78 Billion To Build Two New Plants In Michigan, Upgrade Three Others, 1,400 Will Lose Jobs

Employee buyouts, early retirement offers and more efficient plants will result in job losses as Chrysler continues its restructuring plan.

DETROIT (AP) - DaimlerChrysler AG's Chrysler Group plans to build two new plants in Michigan and upgrade three others, but because the plants will be more efficient, there will be a net loss of about 1,400 jobs.

The $1.78 billion investment, formally announced Wednesday, includes a new $700 million axle plant in Marysville near Port Huron and a new $730 million plant in Trenton to build the next generation Chrysler V-6 engine.

The company also plans to build a new $300 million paint shop at its plant in Sterling Heights, where it makes the Chrysler Sebring and Dodge Avenger mid-sized cars, and it also is making a $50 million investment in its Warren stamping and assembly complex, which now makes the Dodge Ram and Dakota pickup trucks. A new version of the Ram is coming in 2008, the company has said.

The new axle plant will replace the Detroit Axle plant, which was built in 1917 and now employs more than 1,600, and the engine plant will replace the current engine plant in Trenton which also employs about 1,600 people.

The new Marysville plant will employ about 900 workers, while the new engine plant would employ about 485, the company said. The net job loss is about 1,465 because about 350 workers at the existing Trenton and Detroit Axle plants are expected to take buyouts or early retirement offers under a restructuring plan announced Feb. 14. The company hopes to shed 13,000 jobs under the restructuring plan.

Chrysler Chief Executive Tom LaSorda said he did not know if further buyout offers would be necessary to reduce the work forces at the two plants. Company officials said some of the displaced workers could also be transferred to other plants.

State and local governments approved tax incentives for the company to keep the plants in Michigan, and even though the employment is lower than current levels, Gov. Jennifer Granholm said the incentives are justified.

''It was a choice between this and no investment,'' she said, adding that the jobs could have gone to neighboring states or Mexico.

Granholm, who attended the news conference, also said the investment sets up the possibility of further expansion by Chrysler.

Members of UAW Local 961 at the Detroit Axle plant this week voted more than 90 percent in favor of new work rules for the new plant, United Auto Workers President Ron Gettelfinger said. Trenton workers already have approved similar changes.

Chrysler said the new rules are essential to building the plants, allowing employees to work in teams and do multiple jobs. The rules are similar to those approved by the union before Chrysler built a new four-cylinder engine plant in Dundee.

The Detroit Axle plant makes front- and rear-drive axles for many Chrysler Group truck products as well as trailing axles for Dodge and Chrysler minivans. It also manufactures powertrain components for the Chrysler 300, Dodge Magnum and Dodge Charger cars, according to the company's Web site.

The new axle plant will manufacture Chrysler and Mercedes products.

Announcement of the new plants come as Chrysler's German parent continues to talk with potential buyers for its U.S. operations.

Chrysler officials said that despite the sale talks, they must continue to modernize their facilities to become more competitive. The new axle plant, complete with high-tech robotics, will allow the company to do the work with far fewer employees.

''The business has a responsibility to keep running'' despite the sale talks, LaSorda said in an interview with The Associated Press on Tuesday.

The new investments will help Chrysler roll out products with great fuel efficiency and performance, he said, and are part of Chrysler's commitment to invest $5.8 billion to $6 billion per year in its operations, LaSorda said. The investment includes $3 billion to build more fuel efficient engines and other powertrain components, LaSorda said.

''We're not going to let up,'' he said.

Chrysler bought the Detroit Axle plant in 1928 and has expanded it at least seven times since the purchase.

LaSorda also said he expects the flexible work rules to spread to all Chrysler plants.

''It's just a function of competing in the worldwide market,'' he said.