Fiat Chrysler Automobiles NV plans to add a multimillion dollar test track near its Sterling Heights Assembly plant as part of a nearly $1.5 billion investment for the facility to produce the next-generation Ram 1500 pickup.
Limited details of the $5.8 million track and its enclosure, as well as additional details of the investment, were outlined in public documents ahead of a scheduled public hearing and vote Tuesday night by Sterling Heights City Council on an estimated $23.3 million, 12-year property tax abatement to aid the company in its investment for “future truck products.”
The investments, according to the application, began Sept. 1. They are expected to be complete by Aug. 31, 2018 — in line with statements by Fiat Chrysler CEO Sergio Marchionne that the next-generation Ram 1500 should begin production in Sterling Heights in the first quarter of 2018.
If approved, the abatement would essentially freeze property taxes for the company so they would not increase on certain parcels of land as a result of the investment. The estimated $23.3 million value of the abatement — about $1.9 million per year — is on taxes the city could have made without the exemption, including about $6.6 million city taxes and $12 million school taxes over the 12 years.
Other investments outlined in the application include $41.8 million for “a complete renovation of old south plant paint shop”; $8.1 million in Trim Chassis Final upgrades; $6.4 million addition for a frame unloading area; $5.7 million for truck docks; $2.6 million for a body shop; and roughly $1 million each for new drum storage and trestle upgrades for the Paint to Body area.
City officials argue the incentives are beneficial in the long-term for job growth and investment. The city estimates the new investment and 700 new jobs when production of the pickup begins at the plant will have a regional impact of 2,800 new jobs and $112 million annually for Southeast Michigan.
“The important thing to remember is even with all these incentives we talk about, FCA continues to be our largest taxpayer in the city at just over $2 million a year,” Sterling Heights City Manager Mark D. Vanderpool told The Detroit News in a recent interview. “That’s the end game with all of this.”
A Fiat Chrysler spokeswoman declined to comment on details of the application, saying, “we don’t have anything additional to share about those projects at this time.”
The major overhaul of the Sterling Heights facility and surrounding properties comes as the company axes the Chrysler 200 by year’s end to begin retooling for the Ram 1500 pickup, which is currently built at a factory about 10 miles south in Warren.
The investment, according to the company’s application to Sterling Heights, includes $72.3 million in land and building improvements and $940 million in personal property such as machinery and equipment. It excludes special tooling costs as well as a small portion of the investment that will occur at the Sterling Heights Stamping Plant.
This is the second round of major investments since the company decided to not close the facility as part of its 2009 bankruptcy restructuring. The previous investments since 2010 included $850 million in a state-of-the-art 425,000-square-foot paint shop and $165 million to add a 1-million-square-foot body shop.
Those investments are already part of a 12-year, 50 percent abatement and not included in the current application, according to city officials.
The incentives from Sterling Heights are in addition to the Michigan Business Development Program performance-based grant of $4.56 million and the Michigan Strategic Fund board’s approval of a 15-year property tax exemption last week valued at $11.3 million on up to $1 billion in new equipment at the plant.
Sterling Heights officials say the city is already seeing benefits of the company announcing plans to move production of the Ram 1500 from Warren to Sterling Heights. Suppliers have been scouting a 144-acre industrial supplier park — referred to as the Sterling Enterprise Park — on the site of the former Sunnybrook Golf Course at 17 Mile and Van Dyke near Sterling Heights Assembly.
“The supplier interest is crazy right now with companies looking for locations, which leads to the importance of the golf course redevelopment,” said Sterling Heights Senior Economic Development Advisor Luke Bonner. “We need room to fit all of these suppliers.”
Sterling Heights’ new investments aren’t sitting well with everyone, however.
“I can’t fault Sterling Heights in particular, but I think there should have been some communication by the (Michigan Economic Development Corp.) and Chrysler,” said Warren Mayor Jim Fouts, who said neither the company nor state have talked to the city about the pickup moving. “We’ve given Chrysler millions and millions of dollars in tax abatements. I may want to get some of those back.”
Fouts questioned the MEDC’s role in providing the incentives to move the truck and jobs from Warren Truck Assembly to Sterling Heights, saying the purpose of the MEDC should not be “to help out one city at the expenditure of another city.”
MEDC spokeswoman Emily Guerrant late Monday declined to specifically address Fouts’ comments, saying: “For us, this project was about the creation of 700 new jobs to Michigan, and that was the value we saw in this incentive.”
State officials have said the incentives helped ensure production of the pickup stayed in Michigan, rather than going to existing plants in Illinois or Ohio.
“We’re seeing a commitment to some of these older plants to provide a level of tooling upgrade that I haven’t seen I’ve been on the Strategic Fund Board,” MEDC CEO Steve Arwood said last week. “I think that’s incredibly important. In some ways, that’s almost a new plant when you think about it.”
Marchionne on several occasions has said the company’s overall production plan for the United States of switching away from cars to pickups and other utility vehicles will not result in a loss of jobs for the company.
“We’ve been public on this, by the time we finish with the retooling of Warren, Sterling and Jefferson, plus the stamping ... we’ll have more people employed than we have now,” he told The News during an event for United Way for Southeastern Michigan last month.
The 700 confirmed new jobs at the 5 million-square-foot plant in Sterling Heights are about 1,000 less than the potential workforce increase outlined by the United Auto Workers as part of the union’s deal with the automaker in 2015.
FCA US last week said the company is “not confirming total SHAP workforce at this time,” saying it “will assess employment needs as production ramps up.” The number of new jobs in Sterling Heights likely will be determined by the number of workers who follow the Ram 1500 from Warren to Sterling Heights or if a third shift is added.
According to UAW’s 2015 contract summary for members, there’s a “potential workforce increase” of 1,751 people at the plant in Sterling Heights, while Warren Assembly is expected to have a new product in 2019 and a potential workforce reduction of 2,406 people.
Marchionne said Warren Truck would continue to build the current Ram 1500 for a period of time before it would “embrace the new architecture for the Grand Cherokee and the Grand Wagoneer.”
Industry analysts have questioned if the company can fully utilize the 3.31 million-square-foot plant in Warren with the announced products.