After months of analysis, Chrysler Group president and chief executive officer Dieter Zetsche announced today that a proposed new manufacturing facility, incorporating innovative supplier initiatives for Windsor, Ontario, will not be built because of business viability issues. The “greenfield” concept study was initially linked to contract negotiations last year with the Canadian Auto Workers (CAW). The innovative labour agreement reached with the CAW was the first step for the proposed project. A Chrysler Group project team was put in place to begin exploring the business viability with potential suppliers and governments. The business environment has significantly changed since last October, said Zetsche. “The state of the automotive market has created a formidable hurdle,” he said, “especially for a small, entry-level vehicle such as the one we were considering. Additionally, competitive pricing, ongoing incentives and increasing overcapacity in North America led us to conclude that this is not the time to add new capacity.” Zetsche credited the efforts of the CAW, the provincial and federal governments in Canada that were discussing their potential role in the project, as well as the suppliers that were interested in managing significant parts of the production process. “Everyone gave it his best, but after careful examination, we couldn’t reach an economically viable business case,” said Zetsche. The project’s business model is one example of Chrysler Group’s efforts to venture in a new direction in manufacturing flexibility, so that the company is better positioned to react to fluctuations in market conditions and launch new products, while lowering its overall investment in vehicle programs. This particular project involved building a new state-of-the-art assembly plant, with major parts of the production process – possibly including paint and body shops, as well as chassis assembly – turned over directly to suppliers. The suppliers would have been responsible for some of the investment, hiring of employees and managing those areas of the plant. Zetsche added that even though a viable business case could not be made, the business model followed on the project is worth considering in the future. “Certainly, we believe there is potential value in this business model and we will continue to look for opportunities to explore it,” said Zetsche.
Product Plan Remains Intact
“Today’s announcement does not change the number of new product introductions planned by the Chrysler Group,” Zetsche said. “Our continuing passion to bring innovative products to market enabled us to add seven new vehicles to our five year product plan,” said Zetsche. “It was with the same passion that we pursued the Windsor Project to add another one. It is unfortunate that, due to lack of viability, we had no choice but to make such a difficult decision.”
Commitment to Canada Continues
Zetsche also confirmed Chrysler Group’s commitment to investment in Canada, by announcing that $1.4 billion (Cdn) would be directed into the Brampton Assembly Plant for the next generation of full-size sedans going into production early next year, including the recently announced Dodge Magnum and Chrysler 300C. This is part of a total investment of $2.6 billion (Cdn) between 2002 and 2005 in existing Canadian operations, none of which will be affected by the decision announced today. “No other auto company will likely match that level of investment in Canada over the next few years,” said Zetsche. In addition to the Brampton investment, Zetsche pointed out that $460 million (Cdn) had already been invested at Windsor Assembly for the recently launched Chrysler Pacifica.