Chrysler, GM To Invest Combined $1B In Plants

DETROIT (AP) — Hard-hit Kokomo, Indiana, got a big boost from Chrysler on Tuesday when the automaker announced it plans to pump another $843 million into three factories to build a new front-wheel-drive transmission.

General Motors, meanwhile, will announce Wednesday that it will invest $163 million in two Michigan plants and an Ohio foundry to make small-car engines, according to a person familiar with GM's plans. The person was not authorized to talk about the plans ahead of the formal announcement and asked not to be identified. GM says the moves will retain 184 jobs.

Both companies are recovering from last year's auto industry meltdown when they were forced to take government bailouts to make it through bankruptcy protection.

The Kokomo announcement came just hours ahead of a visit to the plants by President Barack Obama and Vice President Joe Biden, who promoted the benefits of the auto industry bailout.

Chrysler said it will pay for equipment to modernize the two Kokomo transmission factories and a casting plant. The investment will extend the life of the plants and help retain nearly 2,250 jobs, equipping them to build a new front-wheel-drive transmission for unspecified future vehicles, the company said.

The automaker already has announced that it will build a new 8-speed automatic transmission in Kokomo in 2013.

Chrysler said the new investment, to start early next year and run through the third quarter of 2012, would raise the company's commitment to the Kokomo plants to $1.1 billion, pushing its total U.S. factory investment to nearly $3 billion since it emerged from government-funded bankruptcy protection in 2009.

The Auburn Hills, Michigan-based automaker, now run by Italy's Fiat Group SpA, was near death before getting a $12.5 billion bailout from U.S. taxpayers to make it through bankruptcy. In exchange, the government got a 10 percent stake in the company, which still owes taxpayers roughly $5.7 billion in loan payments.

Declared one of "America's fastest-dying towns" by Forbes magazine in 2008, Kokomo hit bottom in June 2009 when unemployment in that midsize city in north-central Indiana reached 20.4 percent. Unemployment is still higher than the national average, but it dropped by nearly 8 percentage points to 12.7 percent in September.

The Chrysler bailout helped keep the company's Kokomo transmission plants open. The Kokomo area also benefited from about $400 million in stimulus money, including an $89 million Energy Department grant to help Delphi Automotive Systems develop electronic components for hybrid vehicles.

The Kokomo investment would be Chrysler's largest in a single year. It's contingent on the city approving tax breaks.

Chrysler Group LLC has said it will partner with German-based ZF Group on the next generation front-wheel drive transmission. ZF is providing design and technology.

"For years, Kokomo has been at the center of our powertrain strategy and the potential of an additional investment reaffirms that position," Sergio Marchionne, CEO of Chrysler and Fiat, said in a statement.

The Indiana Transmission Plant I in Kokomo now makes a rear-wheel-drive transmission for the Jeep Grand Cherokee, Jeep Liberty, Dodge Dakota and Ram Trucks and a transmission for heavy-duty trucks. Transmission Plant II makes a five-speed transmission for the Chrysler 300, Jeep Grand Cherokee, Dodge Nitro and Dodge Charger. The Kokomo Casting Plant manufactures aluminum parts for transmissions and other components.

Chrysler's finances have been improving, although it still is losing money. The company cut its third-quarter net loss to $84 million but said it expects to make a pretax profit of $700 million this year, up from a previous forecast of $200 million. It also expects to end the year with $500 million in positive cash flow. Previously, it expected to burn through $1 billion in cash.

GM will announce Wednesday that it's rehiring or retaining 184 workers to make 1.4-liter, four-cylinder engines for the Chevrolet Volt electric car and Chevrolet Cruze compact. The company said it will invest $163 million at its Flint Engine South plant, a parts plant in Bay City, Mich., and a foundry in Defiance, Ohio. In Flint, the company will rehire 135 workers; it will retain 49 jobs in Bay City and Defiance.

The jobs are in addition to the 160 people already hired at the Flint Engine South plant, which will begin making the engines early next year. The new hires will come from a pool of workers laid off earlier this fall when GM closed down a neighboring engine plant in Flint.

GM currently makes engines for the Volt and Cruze in Austria. It has invested $250 million in the Flint South plant to make the engines there. GM will be able to produce 400 engines per day initially, but will gradually increase production. The plant has the capacity to make 1,200 1.4-liter engines per day. In another part of the plant, 400 workers make the 3.6-liter, V-6 engine used in the Chevrolet Traverse, GMC Acadia, Cadillac CTS and other vehicles.

The plant will make two versions of the 1.4-liter engines: A 100-horsepower base engine for the Volt, which is electric but has the gas engine as a backup, and a 138-horsepower, turbocharged version that is offered as an option on the Cruze.

GM's fortunes also have been improving. The company made $4.2 billion during the first three quarters of the year and pulled off an initial public stock offering last week. It, too, had to be rescued by the U.S. government. GM got a $50 billion bailout to get through bankruptcy protection.