Toledo antes up to keep Jeep Wrangler production
Toledo — Public officials in Toledo are spending millions to purchase and clean up land in an attempt to persuade Fiat Chrysler Automobiles NV to keep, if not expand, production of the Jeep Wrangler in the city. However, a major concern for keeping production of the next-generation SUV — due out in 2017 — here may not have anything to do with land or the city.
The Toledo Supplier Park that produces the current Wrangler has outside companies, including units of South Korea-based Hyundai Mobis and German-based Kuka, assembling a large part of the highly profitable SUV. The automaker does only final assembly and paint.
The unique supplier park, located within the 312 acres of Toledo Assembly Complex, is a major concern for future production of the next-generation Wrangler for Fiat Chrysler CEO Sergio Marchionne, according to people familiar with the situation.
"What Marchionne would like is to have the advantages of high-capacity utilization, owning that capacity and taking advantage of that for himself versus having a supplier doing some of the things his competitors do internally," said David Cole, Center for Automotive Research chairman emeritus. "It really adds another level of complexity to the situation."
Public officials in Ohio have been working to persuade Marchionne to keep production of the iconic SUV in Toledo are optimistic their plan will work.
At the time the supplier park opened in 2006, Chrysler (now FCA US LLC) didn't want to invest the money to build a production plant for the Wrangler and the new four-door Unlimited model. The deal, made when the automaker was part of Daimler, allowed Chrysler to save hundreds of millions of dollars and keep the costs off its balance sheet, but allow it to assemble a new-generation Wrangler.
The arrangement was thought to be revolutionary for North American manufacturing. However, the idea — popular in other countries — never caught on domestically, and it remains the only major supplier park of its kind in the U.S.
Chrysler was handing over additional profits to the suppliers in return for assembly operations and things that the automaker really needed but could not afford — a situation that a financially healthy company such as Fiat Chrysler may not want to continue without significant incentives.
"For some things, being a supplier park makes a lot of sense," Cole said. "For other things, with the environment that we're in and the changes going on, it doesn't make that much sense.
The supplier park functions like one traditional assembly plant, but is operated by three companies: Kuka Systems North America produces the body and Mobis North America assembles the Wrangler's rolling chassis — essentially the backbone of the vehicle. The suppliers own the machinery and physical buildings that produce the Wrangler, according to a Fiat Chrysler spokesperson. Through an elaborate electronic tracking system, the body and chassis meet in Fiat Chrysler's area of the plant for final assembly. Since 2012, the automaker also has operated the paint shop.
Officials within the supplier park as well as others who support it not only want Wrangler to remain in the city, but they want their companies to remain a part of its production.
"If (Marchionne) wants to take it over and own all this, obviously he will," said Jon Zapf, Mobis North America chairperson for UAW Local 12, which oversees Toledo Assembly Complex and numerous Jeep suppliers. "But Mobis definitely wants to maintain their part of this production process."
When asked about possible changes to the supplier park as part of production of the next-generation Wrangler, Jeep CEO Mike Manley recently told reporters that "there's bound to be changes," but he wouldn't get into specifics "until everything is settled."
"What you're trying to do is to solve as many of those parts of the equation as you can going forward," he said.
A blueprint for what could happen may have taken place less than three years ago, when Fiat Chrysler took control of the paint shop from supplier Magna International Inc., which had run the facility since June 2006.
At the time, Fiat Chrysler made a deal with the UAW to buy out some employees, but hire a majority of workers from the supplier into the company.
UAW Local 12 President Bruce Baumhower said any time a company takes over a union-operated plant, the UAW negotiates for its members to keep their jobs.
Whether the company keeps production of the Wrangler in the city, there are a number of decisions to be made about production of the vehicle and the supplier park: Does the company continue working with the suppliers as it has? Does it disband the partnerships? Or does it negotiate a new deal altogether?
Fiat Chrysler would not comment on contract obligations with the suppliers.
'Aggressive' incentive plan
In October, Marchionne caused a panic in Ohio by saying production of the next-generation Jeep Wrangler may move out of Toledo because of significant retooling costs to provide possible enhancements such as an aluminum body.
Since then, city and state officials have rolled out the red carpet in the form of what officials are calling an "aggressive" incentive plan that Fiat Chrysler has been reviewing since mid-March.
"It is very clear that they are doing their due diligence," said Matt Sapara, the city's business and economic development director. "There's constant communication and I'm very grateful that Sergio Marchionne has kept his word that he would take a very hard look at the proposal the city of Toledo has given Fiat Chrysler."
Baumhower has led Local 12 in an aggressive campaign to keep Wrangler in Toledo. Union members have organized rallies, attended City Council meetings and produced thousands of signs and T-shirts promoting Toledo as the Wrangler's home.
"We're going to fight to keep what we've done such a great job on over the decades," Baumhower said. "It's a great thing to be a part of and we want it to continue."
Fiat Chrysler is expected to decide by June whether to build the next-generation Jeep Wrangler in Toledo, where the first Jeeps were produced for World War II.
Sapara and other officials with the city, state and automaker have declined to comment on details of the proposed plan, which outside officials expect includes hundreds of millions of dollars in local and state tax credits and financial incentives to expand or build a plant on about 100 acres the city has purchased adjacent to the current Toledo Assembly Complex.
The city has appropriated more than $7 million for land acquisition and cleanup even though Fiat Chrysler has not made any commitments to keeping Wrangler production there.
Development and production of a new plant could cost billions. Fiat Chrysler invested about $1 billion into its Sterling Heights Assembly plant in recent years for updates, retooling and building new state-of-the-art body and paint shops.
'Livelihood of Toledo'
Toledo Assembly Complex directly employs about 6,000 and pumps an estimated $350 million into the local economy through wages and salaries. City officials estimate another 12,000-18,000 jobs and hundreds of millions of dollars are created as a result of the facility as well.
"It's the livelihood of Toledo," said Roy Adams, a lifelong Ohio resident who retired in 2002 after assembling Jeeps for nearly 25 years. "The Jeep plant is what makes Toledo click on all cylinders. This would be just another ghost town if the Jeep plant wasn't here."
Rich Crayon, UAW Local 12 chairman for Toledo Molding & Die, a supplier that assembles instrument panels and other parts for the Wrangler, agrees.
"When this Wrangler news came out, my membership was devastated," he said. "If the Wrangler were to leave, I have 200 people out of a job."
Marchionne has promised a new vehicle would take the Wrangler's place without any jobs lost, but suppliers aren't guaranteed to keep contracts and local officials argue the Wrangler is the most stable vehicle in the automaker's lineup.
"If it were replaced with another model, that's all well and good, but who knows how long that model will last," said Sapara, the Toledo development director. "It might only have a cycle of four or five years. And then what happens to those families? And that's why from our perspective, this is a fight to the death."
But economics and jobs aren't the only reasons Toledo is working so hard to keep the Wrangler. Toledo residents, politicians and business owners not only see Jeep as a cornerstone of their economy, but as a foundation of the city's history. Ask Toledoans, and they'll tell you Jeep is something that's been in their bloodline since Willys Overland Motors gave birth to the first Jeeps in Toledo for World War II.
"Jeep is part of our identity," said U.S. Rep. Marcy Kaptur, D-Toledo. "It's this feeling that isn't shared in other places that haven't lived the manufacture of Jeep intergenerationally."
Toledo residents proudly point to three pillars of the community: the Mud Hens minor league baseball team, Tony Packo's restaurants and Jeep.
"You just have to own a Jeep and live in Toledo to understand why it's important," said Jessi Burnet, a 24-year-old Toldeo native, Jeep Grand Cherokee owner and Tony Packo's employee.
Local 12 member Ron Conrad Jr., whose father and mother worked for Jeep, described it as a "family business" even though it's owned by Fiat Chrysler — the world's seventh-largest automaker.
Family businesses rely on Jeep production to provide steady income to residents. No one knows that better on the North End industrial region of Toledo than Frank Incorvaia.
His father opened Inky's Italian restaurant about halfway between the original Jeep production plant and its current location in 1957. As a boy, he would make dozens of hamburgers a day for workers on lunch breaks. The restaurant, which he now operates, continues to depend on Jeep workers.
"It's a long time in the restaurant business," he said, leaning over a counter inside the eatery. "We've been very fortunate."