FCA invests in Michigan as analysts question future of Ontario plant
February 28, 2019 – Canada's auto industry was left on the sidelines in a major spending commitment by Fiat Chrysler Automobiles this week, just as analysts were raising concerns about the future of the company's Brampton, Ont. assembly plant.
The US$4.5-billion commitment by FCA in Michigan, set to create 6,500 jobs, will build a new assembly plant and upgrade existing ones comes after intense political pressure in the U.S. to increase domestic manufacturing.
The investment, which will pave the way for a new three-row Jeep and other models as part of the company's increasing focus on trucks and SUVs, highlighted the risks for the Brampton plant that produces passenger cars.
"That doesn't bode well," says John Holmes, professor emeritus at Queen's University, who co-wrote a report out this week on Canada's auto industry.
"The big challenge for Brampton has been that, yeah they got the new paint shop after the last round of bargaining with Unifor, but they're building mainly sedans, and the market is really, really soft for cars."
The company and union have downplayed threats to the plant, but the report by Holmes and University of Guelph provost Charlotte Yates notes the plant needs new vehicles in growing segments to survive, even as capital commitments to Canada's auto sector decline.
Investment in Canada's vehicle assembly sector averaged just $1.2 billion a year between 2010 and 2017, down from $2.3 billion a year in the previous decade, the report said, while since 2004, greenfield investment in Canada has totalled $1 billion compared with $15 billion in Mexico.
There's little sign the trend will reverse as the auto sector prepares for flatter growth in North America and a dip in demand in China. The big Detroit auto companies are increasingly shifting to higher-margin large vehicles to prepare, such as General Motors' decision to shut its Oshawa, Ont. assembly plant that produces sedans by the end of the year.
FCA has also shifted away from cars, discontinuing the Chrysler 200 and Dodge Dart in 2016, as it focuses on expanding its SUVs and trucks under the Jeep and Ram names as well as its higher-end Italian brands.
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The company is predicted to phase out the Chrysler 300 produced at Brampton by 2021, says Joseph McCabe, president and CEO of AutoForecast Solutions LLC, though the plant should still get the next generation Dodge Charger and Challenger muscle cars.
"We see that the Charger and Challenger remain the halo products in their car strategy, but they are literally the only thing left in Chrysler's car strategy in North America."
There is a chance, though, that the company could cut the Chrysler car line-up, built on its LX rear-wheel drive platform, entirely, says McCabe.
"It's going to be literally an on-and-off approach. Either they stay in the car business and they need a place to put the LX and they'll keep it there. Or, they get out of the car business and then all of the sudden, unfortunately, Brampton gets ramped up to the highest risk facility that Chrysler has in North America."
FCA spokeswoman LouAnn Gosselin says the company doesn't discuss future plans and products, including the future of Brampton, but did say the company is committed to what it's producing there.
"The products built there have a very loyal and engaged customer base and remain an important part of our product portfolio in the United States and North America, and will continue to be,'' she says via email.
Unifor president Jerry Dias was also quick to assure that the company is committed to Canada, and the Brampton plant that employs some 3,348 unionized workers.
"They are absolutely committed to their facilities here in Canada," he says. "That plant has been on two shifts for years. It's steady, they have a loyal customer base, and they're not going anywhere."
He says he wouldn't be surprised if the company announces another vehicle to complement the Charger and Challenger, noting that FCA has held off on spending part of the $325 million it committed to the plant's paint shop until it figures out the next step for the plant.
The company's investment this week in the U.S., however, shows how important government support is for the industry, says Dias.
"There's no question when you have governments that are vocal and active and challenging the companies, you're much more able to get results."
He says Canadian governments still need to step up. "The sound of their silence is deafening."
Holmes and Yates also called for more concerted government assistance for the sector in their report, especially targeted support for companies that commit to build green vehicles. FCA says its new investments in Michigan would allow for electrification of future Jeep vehicles.
And while Canada didn't get new investments in the latest news, any investment in the Great Lakes region is a win for a sector that is heavily integrated across the border, says Holmes.
"Investments in new assembly capacity in Michigan, or Ohio, and Indiana probably holds out some potential for increased parts sales for Ontario firms," says Holmes.
The region as a whole has been eager for new investment as production has trended further south. Holmes noted in the report that of the 17 new North American assembly plants announced since 2006, 10 have gone to Mexico, seven to the southern United States and none to the Great Lakes region. FCA said in its announcement that the new assembly plant with be the first built in the city of Detroit in almost three decades.
News from © The Canadian Press Enterprises 2019
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