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This could hurt

30 March 2009

The “Obama Administration New Path to Viability for GM and Chrysler” (pdf file) envisions forcing Chrysler into “structured bankruptcy” and makes United States assistance contingent on a forced merger with Fiat.  In return,

Fiat is prepared to transfer valuable technology to Chrysler and, after extensive consultation with the Administration, has committed to building new fuel efficient cars and engines in U.S. factories.

All that is very good, BUT, for Mexico, the question will be what happens to the three Chrysler products built in this country.  The Chrysler products built in Mexico are mostly for the U.S. market, and only secondarily for the Mexican and Latin American one.

From what I’ve read of the “Obama Aministration New Path” it sounds as if the plan is contingent on Fiat doing its manufacturing in the United States.  Chrysler has two plants in Mexico — in Toluca, where Chrysler PT Cruisers and Dodge Journeys are assembled — and in Ramon Arzarpe, Coahuila (Dodge Ram pickups).

The Ramon Arzarpe plant sits — almost literally — on the border.  While the truck may have a loyal following in the United States and Mexico (for a time, Vicente Fox had a Presidential King-cab), the “New Path” funding is in return for using Fiat technology to build more fuel efficient automobiles.  The RAM has a lousy fuel efficiency and carbon-footprint rating.

The PT Cruiser (built in Toluca) has not been selling well, but has a relatively good carbon footprint for an SUV and is a moderately popular domestic (in Mexico) SUV. However, with an engine that only gets about 20 to 25 miles per gallon, it may be a line likely to be discontinued.

The Dodge Journey, a “cross-over SUV” (also built in Toluca) has a poorer MPG rating than the Cruiser (21 miles per gallon combined city and open road driving) and about the same carbon footprint as the Chrysler.

I don’t know if both, or either of these two SUVs will stay in production, and while there is a Mexican and Latin American market for the Cruiser, I’d expect Fiat to phase both brands out in favor of the existing Palio SUV.  Palios are not sold in the United States, but the Brazilian built Fiat SUVs (different versions of the Palio — sedans, SUVs and trucks — are also manufactured in India, Turkey, South Africa and China) are relatively good sellers here.  It might be possible for the Toluca plant to turn out some U.S. market version of the Palio, or a Palio-ized version of the Cruiser or Journey, but I don’t think the Mexican auto workers are the Obama Administration’s first priority in this restructuring.

(Mileage and carbon footprint data from “FuelEconomy.gov“)

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