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Fiat Chrysler to Invest $1 Billion, Pay Bonuses on US Tax Cut

Jan. 12, 2018
The automaker will send $2,000 checks to about 60,000 U.S. workers.

Fiat Chrysler Automobiles NV is investing $1 billion in a Michigan truck factory and paying worker bonuses in the wake of a U.S. tax cut, gestures that could come in handy amid major policy matters being sorted out in Washington.

The Italian-American automaker will share the spoils of a lower corporate tax rate by sending $2,000 checks to about 60,000 U.S. workers. Fiat Chrysler also will spend more than $1 billion and add 2,500 jobs at a factory near Detroit to produce heavy-duty Ram pickups that the company had been making in Mexico.

The moves may prove useful to Fiat Chrysler’s cause. Threats by Donald Trump to withdraw the U.S. from the North American Free Trade Agreement or dramatically rework the deal have spurred warnings from the auto industry of major harm. The president also has said he’ll cut carmakers a break on fuel economy standards his administration is reviewing and explicitly asked them to return the favor by hiring more workers.

“At least making Trump’s tax plan look like it’s rewarding workers very quickly should bode well with the administration,” Dave Sullivan, an analyst at AutoPacific Inc., said by phone. “Part of it also is showing the administration how many workers they have here in the U.S.” and signaling the company will “pump that money right into the economy.”

Share Surge

The investment follows a dramatic jump in Fiat Chrysler stock amid optimism about its product lineup being revamped with fresh trucks and sport utility vehicles. The company’s U.S.-listed shares have surged 31% already this year after almost doubling in 2017. The automaker is set to reveal revamped Ram 1500 and Jeep Cherokee models at the Detroit auto show next week.

“It is only proper that our employees share in the savings generated by tax reform and that we openly acknowledge the resulting improvement in the U.S. business environment by investing in our industrial footprint accordingly,” Chief Executive Officer Sergio Marchionne said in a statement.

Fiat Chrysler has been producing heavy-duty Ram pickups in Saltillo, Mexico. The company’s plant there will be re-purposed to build commercial vehicles.

Consolidating Ram production in Michigan will help protect Fiat Chrysler against possible disruptions to NAFTA. Trump reiterated a threat to pull out of the trade accord on Thursday, a day after Canadian officials said they viewed the odds of withdrawal as rising.


The investment “is a hedge by FCA against the increasing likelihood that NAFTA will be dropped or renegotiated to favor manufacturing in the U.S.,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, said in an email. “It’s the best news for Michigan auto workers in a long time.”

Fiat Chrysler announced a year ago that it would invest in its Warren, Mich., factory to produce the Jeep Wagoneer and Grand Wagoneer SUVs and that the plant would be able to make the bigger Ram trucks.

The roughly $120 million payout to employees will be in addition to profit-sharing checks that United Auto Workers members as part of Fiat Chrysler’s union contract. Wal-Mart Stores Inc. said earlier Thursday it will boost wages to $11 an hour and also give as much $1,000 bonuses to employees after Trump and Congress cut the U.S. corporate tax rate to 21 percent from 35 percent late last year.

By Jamie Butters and Ryan Beene

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Licensed content from Bloomberg, copyright 2016.

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