Chrysler will produce the engine for the North American Fiat 500 at a plant near Detroit, a move that will cost it $179 million.
Engines built in Michigan will be exported to Mexico for use in the North American version of the Fiat 500, starting in late 2011, according to Chrysler’s top executive.
Chrysler plans to launch production of a 1.4-liter inline-four engine at the company’s Global Engine Manufacturing Alliance plant, in Dundee, Michigan, by the end of 2011, said Chrysler CEO Sergio Marchionne.
“This is one more important step forward that demonstrates our intent to deliver on the promise of the Fiat-Chrysler strategic alliance and the substance of the road map we laid out in November,” Marchionne said.
Originally launched as a joint venture for Chrysler, Hyundai and Mitsubishi, the engine plant, an hour southwest of Detroit, is now solely owned by the Detroit maker and is producing Chrysler’s most advanced small engine. “The benefit of this engine is that it has a lot of applications,” said Marchionne, who noted that Chrysler is paying only for re-tooling the plant, though its total investment is expected to come to $179 million.
The research and development costs were covered completely by Fiat, which introduced a European version of the 1.4-liter engine earlier this year, he said.
The 500 is one of numerous Italian-designed products that the partners plan to share as part of the Chrysler turnaround plan – though unlike other shared vehicles, the minicar will maintain its Fiat badge. To hold down costs, critical for such a small product, the North American version of the 500 is to be assembled at the Chrysler plant in Toluca, Mexico. It currently has capacity to produce 100,000 vehicles annually, but that could be expanded if demand is adequate, Marchionne said.
Half the production of the Toluca plan will be shipped to Latin America, primarily Brazil, and the other half will go to the US and Canada.
During a media briefing with Michigan Governor Jennifer Granholm, Marchionne also said Chrysler’s turnaround plan will take 24 months to show some real results. “My experience is that it can’t be done in less than 24 months,” he stressed, noting that the turnaround at Fiat –until recently one of Europe’s most troubled auto companies – had taken roughly the same time to complete.
“We’ll try and do it faster. But by the end of 2011 and in early 2012, you should b e able to tell how our plan is working,” Marchionne said.
Marchionne also indicated he did not expect to stay on as Chrysler’s CEO forever. “I’ve said I’m not going to work 24/7 forever,” he said “The key word is forever,” he emphasized.
Marchionne said the Chrysler board certainly would consider promoting from within. “I think we have a terrific leadership team,” he said. But he did not rule out going outside the company, or even the auto industry, for his replacement, much like Ford did when it recruited Alan Mulally.
(In a separate development, Marchionne said Chrysler will not repay $4 billion in federal bailout money. Click Here for that story.)