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The Indianapolis Star - Will $834 Million Bet Pay Off For Chrysler And Kokomo?

News Article

Location: Kokomo, IN

Retooling the transmission plants in this old auto city for $834 million is considered a sign that revived Chrysler is betting on its future.

But for the big bet to pay off, it will take a stronger U.S. economy beefed up by banks lending again to consumers confident enough to go back to the car lots for new autos.

Coming off its 2009 federal bailout and bankruptcy, the automaker disclosed the project Tuesday in Kokomo. Its sheer scale brought in President Barack Obama, Vice President Joe Biden, Chrysler Group Chief Executive Officer Sergio Marchionne, United Auto Workers President Bob King and Indiana Sen. Evan Bayh.

Chrysler's is the largest industrial investment in the state since Honda announced in 2006 it would build the $550 million Civic car assembly plant at Greensburg.

While the Honda plant created jobs for 900 autoworkers, Chrysler isn't creating jobs but is simply protecting its existing jobs in Kokomo.

If Chrysler is to add workers, it will take a buying spree by consumers. But it still isn't clear what can repower the economy and get consumers spending again.

Economic turnaround?

The recession ended by August 2009, but the rapid expansion necessary to create 300,000 and more jobs per month -- a volume common in the 1990s and early 2000s -- hasn't started.

Economists at the Federal Reserve dimmed their own forecast for 2011. They said Tuesday that the value of the nation's gross domestic product -- all the goods and services produced in the nation -- will expand by only 3 percent to 3.6 percent. This is below their forecast last summer. A growth rate of at least 5 percent is considered necessary to spur a jobs boom.

Along with weak GDP growth has come high unemployment. On Tuesday, the state Department of Workforce Development said Indiana's jobless rate edged down in October to 9.9 percent from 10.1 percent in September. But the rate was unchanged from October 2009.

Asked about creating jobs, Bayh, a Democrat, said strong job growth will follow when China cools its exports and the U.S. muscles up its own industrial base.

"We need to invest and save more in our own country," Bayh said in an interview, adding that rising inflation in China could result in its leaders slowing down their own expansion.

U.S. Rep. Joe Donnelly, a South Bend-area Democrat on hand in the transmission plant, told a reporter, "We must stand up for our own manufacturers" and press China to let its currency rise in value.

That would tend to make its products more costly in the United States and help U.S. exports. More than 6 million industrial jobs have vanished nationwide since 2000, including about 200,000 in Indiana.

America's jobless rate will edge down over time, Donnelly said, but to more quickly create jobs and bring back consumer confidence in the economy, "it'll require we do more manufacturing in the United States" and less importing.

Obama's message

Obama, who lunched on cold cuts and potato chips in Kokomo Fire Station No. 1 with firefighters and Mayor Greg Goodnight, took off his blue suit coat and rolled up the sleeves of his white shirt in the transmission plant.

"It took a lot of years for us to get into this (economic) mess," Obama told an audience of about 200 autoworkers gathered in Chrysler's Indiana Transmission Plant II. "It'll take longer than anyone likes to get us out."

Obama said the federal government's $77 billion bailout of Detroit succeeded and now General Motors and Chrysler are rebounding. He stopped short of saying the economy has mended, and instead described the investment by Chrysler as part of the beginning of the end of the economic downturn.

Chrysler had been giving signs for months that it would launch a new generation of transmissions to accompany a redesigned fleet. Earlier this summer, it committed $343 million to its Kokomo complex.

Chrysler information technology manager Mike Jozwiak said the investments heartened him. "For me, it guarantees a job," said Jozwiak, who recently transferred from Chrysler's now-closed St. Louis assembly plant.

When Chrysler razed its foundry in Indianapolis in 2005, autoworker Ralph Crawford transferred to the St. Louis truck plant. When it closed, he shifted to Kokomo and the seven-year-old Plant II put up when Chrysler was owned by Germany's Daimler.

"This is saving my job for the time being," said Crawford, a custodian in the plant. "But how long this lasts, I don't know."

Marchionne, the Chrysler CEO who also runs Italian automaker Fiat, decided to retool the Kokomo complex for a new generation of transmissions.

Chrysler's three transmission plants and accompanying aluminum foundry are on pace to make Kokomo the world's largest transmission producer, he said, noting that Kokomo could make 2 million transmissions a year.

"I think these people (in the Kokomo plants) are true fighters, in the competitive sense," Marchionne said. "This is a plant on the way back," he said of the 4,400-employee Kokomo complex.

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