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The Windsor minivan mystery

by David Zatz on

The next generation of minivans and the future of Chrysler in Windsor have been wrapped up in some contradictory messages.

In January 2013, Sergio Marchionne said that the new minivan chassis was essentially finished, and that the company was working on figuring out the next steps (which brand should get a crossover, which should get a traditional minivan, and such) — but set the date for production at roughly two years out.  This year, Mr. Marchionne also said the new minivans were two years away.

Adding to the mystery:

  • Mr. Marchionne said that the Windsor plant would require at least a $2 billion investment, which is a hefty amount for retooling, even given Fiat’s penchant for replacing ancient, deferred-maintenance equipment with new, state of the art machinery.
  • The Windsor plant is scheduled for an eight week closure, starting in December of this year. That is nowhere near enough time to rebuild with a $2 billion investment.
  • Chrysler agreed to keep Windsor (and Brampton) open until 2016 when it took loans and other aid from the Canadian and Ontario governments.

The mystery might be resolved if one assumes that:

  • The change in minivan scheduling is based on Mr. Marchionne’s desire to extract concessions from Canada. If the changeover occurs before 2016, the company is stuck with Windsor for production of new models for a time.  (This is not true from Brampton, which won’t have a major changeover until 2017-2019).
  • Mr. Marchionne fully expects to win enough concessions to keep Windsor production attractive (as he did in Italy). Canadians have been Chrysler loyal far beyond any other market, making Canada important to the company even though its  auto market is only around 10% of the United States’ volume. While he talks hardball on globalization and has invested in low-wage countries, he has more often opted to reinvest in existing plants.
  • The new minivan platform was (long ago) rumored to include large cars, crossovers, and even pickups. Windsor would need a new body and paint shop to do this; it could be an add-on — as in Sterling Heights. That would explain much of the $2 billion, and allow expanded production at Chrysler’s only minivan plant, so that additional models would not end Chrysler’s ability to stay the #1 minivan maker. Assuming there is extra room within the existing plant, as some have claimed, putting in new equipment could be done gradually while the plant is running.

This would explain the date contradiction, the high price tag, and the brief eight week closure. When push comes to shove, however, Mr. Marchionne could well choose to move production to a heavily subsidized new facility in the United States or Mexico. Siting in Michigan would reduce transportation costs, since the engines are made in Trenton and the transmissions in Indiana, and most minivans are sold in the U.S. The company could also open a new plant in Saltillo, next to the local Pentastar V6 plant there.

Some have speculated that Toluca, Mexico would be first in line to get the minivans if Canada does not come across with hundreds of millions of dollars in aid for Chrysler; however, there appear to already be plans for new production in Toluca when the Journey and Fiat 500 finish up in the next year or two.

While Windsor workers are well paid, they are also highly educated, healthy, motivated, and reportedly more productive than American or Mexican plant workers. Windsor minivans were generally rated as being higher quality than St. Louis models while both plants were operating, and the plant workers themselves started a bottom-up quality-improvement/cost-reduction effort under Chrysler Corporation. Countering that is the attractiveness of putting the plant out to auction in the United States and Mexico; while presumably Tennessee would not want it, other states, counties, and cities would likely be far more generous than the combined city, provincial, and federal governments, and Mexico has lower wages, no unions, and lax-at-best environmental enforcement, along with the ability to participate in both Latin American and North American tariff-free zones.

The Canadian government appears to be working to appease Mr. Marchionne, but he has recently stated that the money allocated to Chrysler is not yet close to the company’s needs. While Canada has expanded their automotive industry fund, that is shared with Ford and GM as well.

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