Chrysler Plans $597 Million Ontario Plant Investment (Update2)

By Jeff Bennett

March 16 (Bloomberg) -- DaimlerChrysler AG's Chrysler unit assured the head of the Canadian Auto Workers union today that it intends to expand an Ontario plant where workers agreed to wage cuts in exchange for $597 million (C$700 million) in new investment.

Chrysler's plans to add production of a new vehicle at the Brampton, Ontario, plant will be formalized in a letter to the union, CAW President Buzz Hargrove said today. Chrysler spokesman David Elshoff confirmed the letter will outline the automaker's plan to move forward with the investment.

The investment would bolster efforts to preserve 4,200 jobs at the assembly plant outside Toronto. Chrysler, the third- largest U.S.-based automaker, lost $1.5 billion in 2006 and plans to cut 13,000 North American jobs.

``That is what we were looking for,'' Hargrove said in an interview. Production of the new vehicle could begin in 2009, he said.

Chrysler earlier said Brampton's future wouldn't be decided until mid-April. Production of the new vehicle still needs board approval, Elshoff said. He declined to comment on a union Web site report that it will be a new version of the Chrysler Imperial.

Chrysler will pursue financial incentives from the Canadian government for the expansion, Elshoff said.

Auburn Hills, Michigan-based Chrysler had threatened to put the money into another factory if Brampton's autoworkers didn't agree to the cuts before a March 14 board meeting.

Union Concessions

The union members, who make C$30 to C$35 an hour, reversed an earlier decision and voted March 11 to give up a premium amounting to C$125 a week, spokesman Bob Moore said last week. The union also agreed to let outside contractors replace janitors and perform certain repairs.

The wage cut and work rule concessions will save DaimlerChrysler C$25 million to C$30 million a year, Moore said.

The Brampton plant makes Chrysler 300 and Dodge Charger sedans, and Dodge Magnum wagons. It is scheduled to begin producing the Dodge Challenger next year. With the additional production line, the plant will be the only Chrysler factory in the world to produce five models.

U.S. shares of DaimlerChrysler rose 64 cents to $71.94 at 4 p.m. in New York Stock Exchange composite trading. They rose 23 percent in the year before today.