Chrysler delays decision

New Kenosha-area plant to be considered in January

By THOMAS CONTENT
tcontent@journalsentinel.com

Posted: Dec. 13, 2006

A decision on whether to invest $600 million for a new Chrysler engine plant near Kenosha has been delayed until January.

DaimlerChrysler AG had been expected to announce its decision by the end of the year.

The automaker, based in Stuttgart, Germany, is in the midst of assessing the operation of its Chrysler Group division, after that unit reported a loss of $1.5 billion in the third quarter.

The unit has been stung by sales shortfalls and disclosures that it was building far more vehicles than were actually needed. Last week, the company announced that the Chrysler Group's No. 2 executive was leaving to run a Mercedes dealership.

Chrysler Group spokeswoman Michele Tinson said the a corporate supervisory board's evaluation of plans for a $2 billion investment in new engine plants is now planned to be finalized by mid- to late January.

At stake is the future of the Kenosha engine plant and its 1,050 jobs. The plant is all that remains of the former American Motors Corp. headquarters and manufacturing operation that Chrysler bought in 1987.

The company has identified a site in the Town of Somers, west of the City of Kenosha, for a new plant. A permit for the plant already has been preliminarily approved by the state Department of Natural Resources.

Permit documents indicate that DaimlerChrysler envisions building a 765,000-square-foot plant capable of producing 440,000 engines per year.

DaimlerChrysler is focusing on a site with just more than 200 acres in the Town of Somers, a rapidly developing community adjacent to the City of Kenosha. The new engine plant would be west of state Highway 31 and south of county Highway L, on land now used for farming.

The site has railroad access and is about four miles from Interstate 94.

The current engine plant, at 5555 30th Ave., operates on roughly 100 acres and is a couple of miles farther from I-94. That factory opened in 1917 and was acquired by Chrysler in 1987 through its purchase of the now-defunct American Motors. It was expanded in 2002, when DaimlerChrysler invested $624 million for a 450,000-square-foot addition.

DaimlerChrysler is under pressure to cut costs at Chrysler Group, after Ford Motor Co. and General Motors Corp. announced massive restructuring programs and plant closings in the last 12 months.

"In 2007, Chrysler is expected to suffer operating losses as a result of the same factors that are plaguing GM and Ford - a weakening economy, declining share and revenues, mix issues (including a deteriorating pickup market), a high cost structure, health care costs," analysts from Fitch Ratings said in a recent report.