F Ford Motor Company

By Mike Colias, John D. Stoll and Chester Dawson 

DETROIT -- Fiat Chrysler Automobiles NV said Sunday it will invest $1 billion in two existing plants, creating what it says will be 2,000 new jobs.

The decision ahead of Motown's annual car show comes as auto makers have faced heat from the incoming administration of President-elect Donald Trump to manufacture more vehicles in the U.S.

Some of the sector's most powerful scions, including Ford Motor Co. Chairman Bill Ford and Toyota Motor Co. President Akio Toyoda, have in the week leading up to the auto show signaled they support seeing more Made in the U.S.A. labels in America's driveways.

"We continue to reinforce the U.S. as a global manufacturing hub," Fiat Chrysler Chief Executive Sergio Marchionne said. Chrysler's Jeep dealerships recently started selling a small SUV made in Italy and the company is moving certain other products to Mexico. Fiat Chrysler, which is forgoing new product announcements at the show, said it is expanding its pickup and SUV lineup at its existing Ohio and Michigan plants.

U.S. buyers for decades placed brands into two categories -- American or foreign. Those distinctions became irrelevant in the past decade as powerhouses like Toyota added production in the U.S. and Detroit's big three cut American workforces and sank billions of dollars into factories overseas.

About half the parts on a typical "American" car come from foreign sources, a sign that buyers now rank safety, quality or design higher than the origin of its content.

Until last week, Mr. Trump's autos criticism centered on a $1.6 billion factory Ford was building for small cars in central Mexico. Mr. Ford called Mr. Trump on Tuesday to tell him the plant was canceled, future small-car production would be done in an existing Mexico factory and $700 million will be invested to create 700 jobs in Michigan, the company said.

Hours later, Mr. Trump received another phone call from Mary Barra. General Motors Co.'s chief executive, one of 20 business advisers to Mr. Trump on economic issues and jobs growth, had seen her company called out in an early-morning tweet.

The president-elect said GM's Chevrolet imports from Mexico should be charged a "big border tax." Ms. Barra called Mr. Trump and engaged in a "very positive and cordial" lengthy conversation, according to two people familiar with the call.

The 55-year-old CEO is no stranger to political conflict, having steered GM through a safety-recall crisis shortly after taking the helm in 2014, and the discussion "went very well," one of the people said.

Toyota's $1 billion plan to import small cars to U.S. dealerships later in the decade was also chastised last week by way of Mr. Trump's Twitter account hours after Mr. Toyoda told reporters in Tokyo the company is aligned with the incoming administration. The Japanese executive will appear at Monday at the auto show to reveal important products.

Detroit's auto show has been in the political spotlight before. In 2009, with domestic car companies running out of money and in need of additional funds, GM executives used the event to lobby for government help. Playing off a commitment the company made to launch plug-in hybrids, employees walked the floor of the city's Cobo Hall carrying signs saying "Here To Stay" and "Charged Up" in an attempt to get the attention of lawmakers just days before Barack Obama's inauguration.

One of Mr. Trump's biggest concerns -- Mexican car production -- thrived during the Obama administration. The Ann Arbor, Mich.-based Center for Automotive Research estimates Mexican light-vehicle assembly capacity is projected to double in size between 2010 and 2020.

In 2011, following its bailout of two Detroit car companies, the White House declared a "quiet resurgence" was under way in American manufacturing, led by an auto industry poised to invest.

In the six years that have followed, 11 new assembly plants have been built or announced in North America, with nine of them going south of the U.S. border, according to CAR, including the one Ford shelved.

Ms. Barra, as an adviser to Mr. Trump, could emerge as the best-placed defender of a broad move to find lower-cost manufacturing resources. Companies like GM are investing heavily to stave off Silicon Valley tech companies in the race to build autonomous vehicles that are safer than those driven by humans, and to meet stringent fuel-economy standards set by the Obama administration.

GM is pushing low-cost sourcing more vigorously than any of its rivals. The Detroit auto giant imported an estimated 33,000 Buick sport-utility vehicles from China this year, becoming the first major auto maker to tap a factory there to fill U.S. showrooms.

Unlike Ford, which relies on Mexico for low-margin passenger cars like the Fiesta compact or Fusion sedan, GM's plants in Ramos Arizpe, San Luis Potosi and Silao are profit machines. More than 40% of the company's full-size pickups come from Mexico, along with 100,000 of the popular Chevrolet Trax small crossover wagons, according to researcher WardsAuto.com.

Chevrolet Silverado and GMC Sierra pickups underpin GM's overall operating profit, estimated to have topped $10 billion in 2016. The Detroit auto maker is in the midst of a $5 billion investment spree in Mexican facilities and is gearing up to boost its output of compact SUVs in the country.

GM also relies on exports from South Korea.

--Michael Bender contributed to this article.

Write to Mike Colias at Mike.Colias@wsj.com, John D. Stoll at john.stoll@wsj.com and Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

January 09, 2017 02:47 ET (07:47 GMT)

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