Italian-American automaker, Fiat Chrysler Automobiles, unveiled its plans to spend $1 billion to transfer production of Ram heavy-duty pickup trucks from Saltillo, Mexico to Warren, Michigan truck factory in 2020, a decision that will reduce risk to the automaker’s profit from the possible changes to the North American Free Trade Agreement.
The carmaker also said it would provide a special bonus of about $2,000 to each of its 60, 000 hourly and salaried U.S. employees after the recent tax code overhaul.
“These announcements reflect our ongoing commitment to our U.S. manufacturing footprint and the dedicated employees who have contributed to FCA’s success,” the company’s Chief Executive, Sergio Marchionne, said in a statement.
“It is only proper that our employees share in the savings generated by tax reform and that we openly acknowledge the resulting improvement in the U.S. business environment by investing in our industrial footprint accordingly.”
The company said the relocation of production will create 2,500 new jobs in Warren.
Since August, the U.S., Canada, and Mexico have been in talks to revise the 24-year-old Nafta agreement, and are going for a crucial round in Montreal later this month. One of the main goals of the Trump administration in wanting the renegotiations has been to halt and inverse the stream of car production from the U.S. to Mexico.
“We’ve made a lot of headway. We’re moving along nicely,” President Donald Trump said in an interview. He also repeated his threat that the U.S. would ditch the pact if it did not get what it needed in the negotiations.
Automobile companies have redeveloped production plans since the election of President Trump in 2016.
Last year, Ford Motor Co. postponed a factory in Mexico. Toyota Motor Corp. will launch a plant worth $1.6 billion, with Mazda Motor Corp. in Alabama by 2021.
Foreign carmakers have been improving their plants or establishing new ones. These companies are now set to exceed the domestic ones in the U.S. production over the years, but Fiat Chrysler’s move could slow that development down.
Just like General Motors Co., Nissan Motor Co., and other carmakers, Fiat Chrysler is greatly exposed to changes in Nafta. According to WardsAuto.com, Fiat Chrysler rose production in Mexico by about 40 percent in 2017 compared with 2016. It produced 626,000 trucks or 27 percent of its total North American production volume.
In addition, according to AMIA, Mexico’s carmaker association, the country was able to export 276, 842 Ram Heavy Duty trucks in 2017, some 88 percent of them to the U.S.
The entire industry increased production in Mexico by 13 percent last year, while decreasing in Canada and the U.S. due to decelerating U.S. market.
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