The Wrangler, the best selling nameplate for Jeep, which has been produced in Toledo Ohio for decades, might be produced elsewhere. Fiat Chrysler (FCA) owns Jeep and at the end of last year CEO Sergio Marchionne indicated that it might move Wrangler production due to changes in the model planned for 2017. On Monday, Marchionne pretty much asked for a payoff in order to keep the Wrangler in Toledo.
In his remarks at the 2015 Automotive News World Congress, in Detroit, Marchionne stated how FCA’s concern about keeping Wrangler production in Toledo could go away:
If [the city] bought all the land and built the plant, if [the city] did that the problem would go away… a big chunk of it.
So why could it be more expensive to stay in Toledo. FCA wants to change the Wrangler to an aluminum body which can’t be made in the present Toledo factory for technical reasons. FCA would need a new factory without stopping current production. It would be cheaper to move to a factory that can make aluminum bodies. The current Wrangler is the last Jeep with a steel body.
The problem with that logic is that the only plants open to move the production to build only unibody cars so if the Wrangler stays body-on-frame those other plants would need to be retooled as well offsetting the cost Marchionne talked about. Not to mention the cost in having to train a new labor force to build them outside of Toledo.
In Monday press conference attended by The Blade, Mr. Marchionne said he would take a “very hard look” at ways to keep Wrangler production in Toledo. However, he also acknowledged that as it stands currently, it would cost significantly more to do that than it would to move Wrangler production elsewhere.
He has said repeatedly that he’s very grateful for the work of the employees at the Toledo Assembly Complex, noting that they were able to produce more than a half million vehicles last year, and that they’ve met every single production target the company has set for them.
“We owe them something,” Mr. Marchionne said.
The change in plants would put a huge dent in sales as the production tried to ramp back up to what is being done in Toledo today.
The over all costs of moving production is a wash with staying in Toledo.
So what does FCA want? They are looking for a payoff to stay. Usually companies look for tax incentives but it seems FCA wants the city (and indirectly, the state) to buy them land and build the factory for them.
It reminded me of a scene in the movie Animal House (1978) when the Dean is discussing the homecoming parade with the Mayor of Faber:
Carmine: If you want the homecoming parade in my town… you have to pay.
Dean Wormer: Carmine, I think it’s wrong to extort money from the college.
Carmine: Look… as the mayor of Faber, I’ve got big responsibilities. These parades are very expensive. You’re using my police… my sanitation people, my free Oldsmobiles. If you mention extortion again… I’ll have your legs broken.
I don’t want to risk getting my legs broken by using the “E” word but it sure seems like that is what FCA is trying to do to Toledo.
Here is a video clip from WTOL News with Sergio Marchionne’s comments:
Did Fiat’s Marchionne Ask For A Payoff To Keep Wrangler In Toledo?