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Chrysler: Mich. Plant to Run Through 2012

FILE - In this June 13, 2007 file photo, four-cylinder engines are shown at the Chrysler Sterling Heights Assembly Plant in Detroit, Mich. Chrysler Group LLC is poised Friday, Feb. 19, 2010, to acquire the Sterling Heights, Mich., assembly plant for $20 million from the company that has managed the automaker's remaining assets since its emergence from bankruptcy last year.
AP Photo/Paul Sancya, file
Chrysler Group LLC plans to keep its Sterling Heights, Mich., assembly plant open through 2012, preserving 1,200 jobs building the Sebring and Dodge Avenger midsize cars, the automaker said Friday.

The plant near Detroit had been set to close in 2011. But Chrysler agreed to acquire it for $20 million from the company that has managed the automaker's remaining assets since its emergence from bankruptcy last year.

"There is no commitment on the future ... beyond 2012," Chrysler said in a statement.

In court documents filed Thursday, Old Carco LLC - the so-called old Chrysler - requested an order allowing it to sell the plant to Chrysler Group. The Italian automaker Fiat SpA owns a partial stake in Chrysler Group.

A hearing is scheduled for March 11 in U.S. Bankruptcy Court in New York.

Chrysler Group CEO Sergio Marchionne said after the automaker's exit from bankruptcy in June that the plant would close at the end of 2010. But in December, he said the company would keep the plant open into 2011.

Michael Robinet, an auto industry analyst for the CSM Worldwide consulting firm near Detroit, said Chrysler likely has looked ahead and decided it needed the extra production capacity from the plant. Robinet said the plant was retrofitted about three years ago with new equipment.

"The facility from a vehicle production perspective is actually relatively new," Robinet said.

In 2009, Sebring sales dropped 62 percent to 27,460 while sales of the Avenger fell 37 percent to 38,922 as automakers in the U.S. posted their worst year in almost three decades and Chrysler had its worst showing since 1962.

U.S. Rep. Candice Miller, R-Mich., said Marchionne told her and other Michigan members of Congress in December that Chrysler would evaluate in 2011 where future models would be produced and that he expected versions of the Sebring to be built in the United States.

Chrysler spokeswoman Shawn Morgan said the Sterling Heights City Council has twice extended tax breaks on the plant while Chrysler negotiated for the purchase from Old Chrysler. In its statement Friday, Chrysler said it will accept Sterling Heights' offer to transfer property tax abatements to the company.

The decision means Sterling Heights will still get $2.6 million a year in taxes from Chrysler and leaves open the possibility that Chrysler might make a longer-term commitment, the city said. Chrysler has operated the plant since 1983, and it is credited for supporting parts suppliers and merchants in the surrounding areas.

"Loss of the plant would have created a huge void in the middle of our industrial corridor, which would have been difficult and very costly to fill in these tough economic times," City Manager Mark D. Vanderpool said.

Chrysler intends to "refresh and renew" the Sebring and Avenger. It is looking at improvements to the interior and how to make the engine and transmission quieter.

After that, Chrysler plans to build a new midsize car based on Fiat's C-EVO frame and suspension, with a Fiat-based engine and transmission. The frame, being designed for a European compact car, can be stretched to serve as a U.S. midsize car, a person briefed on the plans had said previously. The person asked not to be identified because the plans have not officially been made public.

The person also said Chrysler is trying to get the car on the U.S. market sometime in the middle of 2011.

Morgan would not say if the Sterling Heights plant will make the new car.

Associated Press Writers Jim Irwin and David Runk contributed to this report.