Chrysler may invest $1 billion in Fenton
By Gregory Cancelada
©2005, St. Louis Post-Dispatch
File photo: DaimlerChrysler plant in Fenton
( LARRY WILLIAMS/P-D)
Chrysler Group of DaimlerChrysler AG is proposing to invest up to $1 billion in its two assembly plants in Fenton if that city, the state of Missouri, St. Louis County and the United Auto Workers provide sufficient support for the automaker’s proposal.
Without assurances from all four, “I doubt that this proposal will move forward,” Al Pope, a senior manager for external affairs and public policy at Chrysler, said during a Tuesday evening presentation to Fenton’s Board of Aldermen.
The Post-Dispatch reported in August that the state of Missouri was considering a multimillion-dollar incentive package to draw a large investment into the Chrysler plants.
The proposal presented Tuesday calls for Chrysler to make an initial investment of $531 million over the next four years, aimed at modernizing and giving both plants state-of-the-art manufacturing capabilities.
About $377 million would go to the South assembly plant, where about 3,200 people build the Dodge Caravan, Grand Caravan and Chrysler Town & Country minivans, which are based on two different frame sizes.
That investment would allow the South plant to build up to three types of vehicles and it ensures the facility keeps operating over the long term.
Currently, no new models are scheduled to be replace the existing minivan lineup at the plant, Pope said, adding that “the plant can’t be competitive” without the investment.
Chrysler also assembles minivans at its plant in Windsor, Ontario.
The other $154 million would go to the North assembly plant, where about 2,300 people build Dodge Ram pickups.
With that investment, the North plant can continue to build a similar vehicle, he said.
After this initial investment, Chrysler would look at investing up to $500 million in both plants over the next five to seven years.
From Fenton, Chrysler wants a 70 percent abatement of the property taxes paid on new machinery and equipment. From 2006 to 2019, that would equal about $24 million in savings for Chrysler in its first $531 million investment, versus if the property was taxed at current rates.
However, Pope indicated that the proposal would not go through without the tax breaks.
“Thirty percent of $1 (in investment) is worth more than 30 percent of zero,” he quipped.
Pope didn’t have any information as to whether employment levels would increase or decrease with the future investment.
The city of Fenton would implement the tax abatement by issuing $1 billion worth of industrial development bonds, so-called Chapter 100 bonds. Under that complex tax break program, the city will “buy” the new equipment and then “lease” it back to Chrysler.
On Tuesday night, the Fenton Board of Aldermen approved a nonbinding resolution supporting the tax breaks. It will hold a public hearing before it is scheduled to vote on the tax breaks Oct. 17.
“I think this is the best news this region has had in a long time given the state of the automotive industry,” Fenton Mayor Dennis Hancock said after the vote.
Though some groups may oppose the tax breaks, he hopes people look at the potential revenue loss versus the potential revenue gain for the city.
“The potential revenue loss is that the (South) plant shuts down,” Hancock said. “That’s a very real possibility since there is no product scheduled for that facility beyond 2006.”
Chrysler is currently in discussions with St. Louis County, though Pope didn’t say what Chrysler wanted from the county. He also didn’t say what kind of support the automaker was looking to receive from the local unions of the United Auto Workers.
Spokesmen from the Missouri Department of Economic Development and St. Louis County Economic Council couldn’t be reached Tuesday night.
After the presentation, Pope declined to comment further on the proposal, such as the kind of vehicle that might be built in the South plant.
News reports have said that Volkswagen and DaimlerChrysler AG are negotiating a deal in which Chrysler would build minivans sold under the VW brand, raising the possibility that those vehicles might be assembled in Fenton.
However, Chrysler hasn’t announced any deal with Volkswagen.