OM in the News: Fiat Chrysler to Open New Factory in Detroit

Fiat Chrysler plans to open a new vehicle factory in Detroit, the first new U.S. assembly plant to be built by a major domestic car maker in at least a decade, reports The Wall Street Journal (Dec. 7, 2018). The Italian-American auto maker plans to make an SUV at the new factory as part of its efforts to expand its iconic Jeep brand. The firm will roll out more truck and SUV models as it responds to a sharp consumer shift away from passenger cars.

The move comes as GM has upset lawmakers about its plans to end production at assembly plants in Ohio and Michigan. President Trump and other elected officials also have blasted GM for the cuts, which will result in up to 6,700 factory layoffs and 8,100 salaried workers layoffs.

The factories GM plans to idle are making slow-selling sedan lines. Fiat Chrysler, which eliminated nearly all of its car lines a year ago, has much less empty factory space in the U.S. Many of its truck and SUV plants operate around the clock making popular models like the Jeep Wrangler and Cherokee, and its Ram truck. Fiat Chrysler has continued to max out its existing factory space. The auto maker’s plant utilization—a measure of its output versus its production limit—is 92%. That is far higher than the 81% rate at Ford and 72% at GM.

Assembly plants are typically major employers, hiring several thousand workers on multiple shifts, and can take up to two years to construct and cost about $1 billion.

Classroom discussion questions:

1. What major trends are taking place in the auto industry?
2. Why is plant utilization important?