Chrysler Group LLC, the U.S. automaker controlled by Fiat SpA (F), will add about 500 workers at a Mexican engine plant, two people with direct knowledge of the matter said.
Chief Executive Officer Sergio Marchionne will provide details later this week when he visits the Saltillo area with Mexican President Enrique Pena Nieto, said the people, who asked not to be identified speaking ahead of the announcement. Chrysler has five plants in the area.
Chrysler’s investment will total $164 million to expand production at the engine factory in the town of Ramos Arizpe, one of the people said. Shawn Morgan, a Chrysler spokeswoman, declined to comment.
“Mexico is quite competitive in the automobile industry and we’re going to see more investments like this,” Armando Soto, president of Kaso y Asociados, a Mexico City-based auto industry consulting firm, said in a telephone interview. “This kind of investment helps consolidate a region as an automotive cluster.”
Automakers are expanding production in Mexico to capitalize on lower labor costs that bolster the profitability of vehicles sold in the U.S. market. Chrysler began building the ProMaster, a Ram version of the Fiat Ducato light-commercial vehicle, at a nearby facility in July. Marchionne said last week the van assembled in Mexico uses some parts from Fiat’s Ducato facility in Italy.
Volkswagen AG (VOW)’s Audi brand is investing $1.3 billion in a new plant in San Jose Chiapa with a capacity of 150,000 cars a year. General Motors Co. (GM) has budgeted $691 million to expand three existing Mexican factories. Fiat also builds the North American version of the 500 subcompact at a plant in Toluca.
Sharing components, technology and production capacity among brands is a crucial aspect of Marchionne’s plan to combine Fiat and Chrysler. Future models will cut costs by sharing parts that comprise as much as two-thirds of a vehicle’s value.