Editorial: Marchionne Settles On Minivan Plant Location

UPDATE: Mere minutes after our prior editorial was published Chrysler announced that they will be withdrawing their request for funding from the Canadian government, and“…confirmed its intention to begin to allocate to our Windsor, Ontario plant the development and industrialization of the next “people carrier” architecture (the so-called next minivan and derivatives)” We are awaiting a call from Chrysler to discuss the matter. In the mean time, y ou can read the official announcement here.The biggest news for North America’s auto industry was announced at Geneva, and it wasn’t a new product debut. According to Automotive News, FCA CEO Sergio Marchionne has decided on a location for the next assembly plant, and things aren’t looking great for the current plant in Windsor, Ontario.Claiming that the merger between Fiat and Chrysler “flattened the world out completely”, Marchionne reportedly dismissed the idea of national loyalty (Marchionne is a naturalized Canadian), telling reporters“…it will become evident over the next 24 to 48 hours that we have taken a position, and life will go on. I think the decision has been made. We’re in the position of finalizing the choice. We’re pretty well done.”Marchionne has been lobbying both the Ontario and Canadian federal government for a reported $700 million in funds, the single largest amount aside from Chrysler’s 2009 bailout package. Marchionne said that countries competing for auto production have an “…obligation to match and effectively equal what the competition is offering” in terms of subsidies, suggesting that both levels of government ought to offer competitive subsidies to keep the minivans in Windsor.For a country f 35 million people, this is unrealistic. Canada simply cannot compete with the handouts being offered by the United States and Mexico, which are de rigueur for any auto maker looking to set up a plant (or re-tool an existing one). A relatively high Canadian dollar also contributes to high labor costs, something that can easily be remedied by moving production to the southern United States (where it will be reduced to $14-$16 per hour, or roughly half of what it costs in Canada), or Mexico, where workers would earn just a few dollars per hour.Labor costs aside, Mexico is looking like the most appealing choice for the new vans. FCA has the capacity in Mexico to build the new vans, thanks to the Dodge Journey’s move to the Sterling Heights, Michigan plant, and the Fiat 500’s move to Poland. Along with NAFTA, Mexico has a free trade agreement with the European Union, allowing FCA to export cars to a broad range of markets. And with planned upgrades to a flexible line, this could mean anything from the new minivans to a crossover to a new sedan. The timing of the van’s launch also coincides with the end of Chrysler’s contract with Unifor (formerly the CAW), allowing them to make a clean break from Windsor.Assuming Chrysler does leave Windsor, it will herald the start of a painful, Australia-style exodus from Southern Ontario for the Detroit Three. GM’s Oshawa plant is almost certainly the next plant to close, which will devastate the working-class town that has built itself around GM. That will leave just one plant for each American OEM- the GM CAMI plant in Ingersoll, the Ford plant in Oakville and the FCA plant in Brampton as the sole remnants of Detroit’s Canadian automotive assembly sector. On the other hand, Ontario’s three non-unionized transplants, operated by Honda and Toyota, don’t appear to be going anywhere.