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DaimlerChrysler Scraps Plans For Canadian Plant

By Agence France-Presse DaimlerChrysler AG has scrapped plans to build a $1.2 billion assembly plant in Ontario because of competitive pressures in the North American new-vehicle market, the automaker said May 22. Chrysler officials had hoped to produce a compact pickup aimed at younger buyers at the proposed plant in Windsor, creating some 2,500 jobs. Although Canadian media pegged the entire investment for the industrial park at $1.2 billion, the automaker's Chrysler Group refused to discuss financial details. The project was conceived as a collaboration with suppliers, who would also supply some of the investment, hire employees and run certain parts of the plant in what Chrysler hoped would be a model for flexible manufacturing. But after six months of working with Canadian officials, unions and suppliers, Chrysler said there was no "viable business case" for increasing production given the increasingly challenging conditions in the North American auto market. "We could not find a business case which would justify the investment . . . where there was very little chance that this could provide for reasonable return to our bottom line," said Dieter Zetsche, CEO of the Chrysler Group, headquartered in Auburn Hills, Mich. The continued "sluggishness" of the economy, the probability that new-vehicle prices will continue to decline, and "a further increase in competitive pressure, not just among the Big Three but very much driven by the imports as well," worked against the project, Zetsche told reporters. The other factor Zetsche cited was overcapacity: A record 4 million vehicles were piled up on U.S. lots at the beginning of May, traditionally one of the industry's strongest selling months. But through mid-May, sales were only keeping pace with last year, when jittery consumers snapped their wallets shut and gave dealers their worst May in five years, selling only 1.5 million vehicles. Sales of vehicles in the United States account for the lion's share of new-vehicle sales in North America. In 2002, American consumers bought 16.8 million units versus 1.73 million sold in Canada. Copyright Agence France-Presse, 2003

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