Chrysler Investing $843M In U.S. Plants

Automaker on Tuesday announced plans to pump another $843 million into its Kokomo, Ind., factories to build a new front-wheel-drive transmission.

AUBURN HILLS, Michigan (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 its Kokomo factories to build a new front-wheel-drive transmission.

The investment was announced ahead of a visit to the Kokomo transmission plants Tuesday by President Barack Obama and Vice President Joe Biden, who planned to discuss the auto industry bailout.

Chrysler said in a statement that the money would pay for equipment to modernize the two transmission factories and a casting plant. It would 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 the transmission plant will built a new 8-speed automatic transmission in Kokomo in 2013 with a German parts supplier.

Chrysler said the new investment 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.

For Obama, the trip to Kokomo is a chance not only to respond to bailout critics, but also to promote the $800 billion economic stimulus he pushed through Congress in the early days of his presidency.

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 plant 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 has said it will partner with German-based ZF Group on the next generation front-wheel drive transmission, which 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," said Sergio Marchionne, CEO of Chrysler Group LLC. "When introduced, this new front-wheel drive transmission, along with the previously announced eight-speed transmission we will also produce in Kokomo, will transform our future products and position them as leaders in marketplace."

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 pre-tax 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.

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