Construction on FCA Mack plant races to stay on timeline
Detroit — Although some major projects in Detroit are facing delays, industry experts say Fiat Chrysler Automobiles should be able to meet its accelerated schedule to start producing Jeeps at its new assembly plant in the city by the end of 2020.
Over just 16 months, the Italian-American automaker is renovating the Mack Avenue Engine Complex into an assembly plant on Detroit's east side. It also is constructing a paint shop and installing a test track, quality-test lab and trailer marshaling area.
With the Jeep Grand Cherokee SUV's last full redesign in model-year 2011 and anticipation high for Jeep's full-size, three-row SUV, obstacles to completing the $1.6 billion expansion on time could be costly. That is critical, as carmakers compete with each other and Silicon Valley tech firms for the future of the industry with big investments into electric and self-driving vehicles.
"These (Jeeps) are profit-intensive vehicles with high margins," said Bernard Swiecki, assistant director of industry, labor and economics for Ann Arbor's Center for Automotive Research. "They are sacred in a company's lineup. You do not want to hold up the sales of a profit-critical vehicle with a slow production launch. There's this huge amount of pressure to get this done."
Grand Cherokees sold for an average $43,967 in the second quarter of 2019, significantly higher than the Jeep brand average of $37,824, according to Kelley Blue Book.
Preparations for the plant's activation are in motion. The company has contacted pre-qualified residents in the neighborhood surrounding the plant with instructions on how to apply starting Monday for the 3,850 jobs available. FCA will contact the rest of the more than 9,000 pre-qualified Detroiters to do so in two weeks.
The first vertical structural steel column of 299 was put in place two weeks ago for the plant's new 790,500-square-foot paint shop. Renovations to the long-idled Mack II building, now the body shop, are nearly complete, and those at Mack I, the new general assembly building, are underway.
The city of Detroit did not quite meet a 60-day deadline to gather 215 acres for the company's expansion as the city negotiated with the Moroun family-owned Crown Enterprises to acquire an 83-acre manufacturing site. The deals were completed nearly a week after the April deadline.
The city's construction and real estate services group since then has worked to coordinate efforts and processes between public departments, the company, contractors and the community to keep the project progressing.
Now, some development work contracted by the Detroit Economic Growth Corp. for the project is ahead of schedule. Construction of the first section of a sound barrier along St. Jean is expected to be completed by the end of the month ahead of a Sept. 3 deadline, said Dave Manardo, the city of Detroit's director of construction and real estate services.
"The schedule wouldn't allow for any inefficiencies," Manardo said. "In order to meet those schedule requirements, we found a way to get contracts, to get drawing permits, to get follow-up inspections and plan reviews — all this work done as efficiently and as collaboratively as possible."
From announcement to the start of production typically is a three-year time span for new assembly plants, according to the Center for Automotive Research. Since the project, formally announced in February, expands upon the existing engine plant already there, however, the 16-month timeline is doable, Swiecki said. Still, even that is on a fast track, according to the automaker.
"It's a very aggressive timeline," John Powell, FCA's senior manager of paint facilities, told reporters Aug. 13 during a tour of the plant's construction site on the city's east side. "We're doing it in 16 months. A project like this usually might take 18 to 20 months."
And there's little flexibility: "We need to get it done," said Eric Goedtel, FCA's senior project manager of its building group.
Two construction shifts are running, with a smaller second shift starting later in the day working mostly indoors to limit disturbances to the neighborhood. Workers also are on the job during the weekends and holidays.
"That's not uncommon for something like that, especially before the winter months," said Kevin Koehler, president of the Construction Association of Michigan. "Contractors will do whatever they have to do to get the job done for the customer."
Although there is a shortage of skilled-trades labor in Southeast Michigan, finding the talent should not be an issue for FCA, Koehler said.
"I don't see that project being delayed," he said. "I think we can overcome (the timeline). These are major contractors who are specialized in industrial and commercial projects that have access to the workforce they need."
He added vehicle production could begin even as some interior aspects such as administrative offices are being finished.
The project is subject to an executive order that requires 51% of the project's workforce be Detroit residents. It is up to the contractors to meet that standard, and if not, contribute funds for worker training. FCA's Goedtel has said some might not meet the 51% threshold.
Contractors working on Little Caesars Arena who did not meet the requirement contributed $5.2 million. The city does not have reports available on the compliance of FCA's contractors so far.
"There's always challenges in meeting some of those requirements," Koehler said, "but the unionized industry is committed to doing everything to make sure that is adhered to."
The assembly plant comes at an opportune time, noted Eric Larson, CEO of Bloomfield Hills' Larson Realty Group and the Downtown Detroit Partnership.
"A number of the larger projects that have wrapped up like Little Caesars Arena and the initial wave of projects from (Quicken Loans and Bedrock chairman Dan) Gilbert," he said. "It's before the Gordie Howe Bridge gets completely started, and Bedrock has announced they are still going through the planning process on some projects."
The latest delayed major Detroit development is the two buildings expected to rise on the former Hudson's department store site that were once set to open in 2022. Now, Gilbert's real estate business, Bedrock LLC, says the project is on track for 2023 after demolition, remediation and other underground work.
Meanwhile, construction is on pause at the Monroe Blocks development as Bedrock extends its design period and works with brokers to find tenants. And after requesting a one-year extension from the city on the redevelopment of the Joe Louis Arena property, bond insurer Financial Guaranty Insurance Co. has been in talks with a local developer to sell it.
Mayor Mike Duggan has said he is committed to the first assembly plant in the city in 30 years.
The city acquired the 215 acres for FCA for more than $48 million. The city and the Michigan Strategic Fund also granted FCA an incentive package totaling $223 million to offset the cost of the Mack expansion and $900 million in modernization efforts at Jefferson North. And the state provided the city of Detroit $93 million to offset costs associated with site preparation.
For every assembly plant job, another seven are created, according to the center for automotive research. Auto supplier Dakkota Integrated Systems announced plans to redevelop the former Detroit Kettering High School site for a manufacturing facility to support FCA's new plant.
"I consider the automotive assembly plant to be one of the holy grails of economic development," Swiecki said. "They support above-average wages. Those are all reasons why we incentivize so much ... to build plants in a given area."