Brent Snavely

Detroit Free Press

Fiat Chrysler CEO Sergio Marchionne confirmed Tuesday after months of speculation that the automaker plans to move production of its Ram pickups to Sterling Heights from Warren and move production of a Jeep SUV to Toluca, Mexico, from Belvidere, Ill.

The moves are part of a massive plan to shift production of smaller vehicles to Mexico while concentrating on the production of more profitable Jeep SUVs and Ram pickups in the U.S.

Marchionne said there would be no net loss of U.S. jobs even though there will be some painful layoffs, a discontinuation of two passenger cars made in the U.S. and the movement of a Jeep to Mexico.

"We have had obviously intense dialogue with our counterparts at the UAW about the implications on head count," Marchionne said. "I confirm now, as we have done with them, that the realignment of the footprint in NAFTA is actually going to yield an increase in manpower."

While most of the plans confirmed by Marchionne today have previously been reported by the Free Press and other media organizations, they had not been verified by the company, leading to anxiety among thousands of workers at the automaker's U.S. plants over the past eight months.

Marchionne said today that the overriding principle that guided the transformation of production was preserving the ability to make any Ram or Jeep vehicle as the company transitions to a new or redesigned model.

"I will give you a perfect example. The Warren Truck Plant, which is historically one of the oldest plants we have in the fold of the old Chrysler and now FCA, is a plant that would have had to go through incredible surgery in order for it to accept the new Ram truck," Marchionne said. “So the realignment of the Sterling Heights plant to accept the new Ram ... allowed us to effectively re-lay out the whole manufacturing footprint by not losing one unit."

FCA shocked workers and automotive analysts in January when it announced plans to eventually discontinue production of the Chrysler 200 in Sterling Heights and the Dodge Dart in Belvidere, Ill. Since then, workers in Sterling Heights have spent most of the year on layoff as sales of the Chrysler 200 dropped by more than 60%. Earlier this month, FCA said it would permanently eliminate a shift in July.

Charles Bell, president of UAW Local 1700, said Tuesday that thousands of workers at Sterling Heights will be relieved as word gets around.

"Today's news is indeed great news for the men and women of Sterling Heights Assembly Plant and those plants that support products built there," Bell said.

He said the UAW will now work closely with its members, the state of Michigan and the company as the plant works through the layoffs. The plant is not scheduled to begin building Ram pickups until late 2017 or 2018.

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Meanwhile, Marchionne said Warren Truck will eventually build the Jeep Wagoneer and the Jeep Grand Wagoneer. Until today, Marchionne has not specifically or clearly discussed plans for two different Wagoneer large SUVs but he has previously referenced "a family of Wagoneers." The Wagoneer is expected to be a full-size SUV that could be offered in several trim levels.

Marchionne also said today that FCA will build the replacement for the Jeep Compass and Jeep Patriot at its plant in Toluca, Mexico. Production of that Jeep SUV is to begin during the second half of this year. Built in 1968, that plant employs about 2,900 workers who produce the Dodge Journey, Fiat 500 and Fiat Freemont.

FCA has said the Patriot and Compass will be replaced with a single model but has not revealed the name of the new vehicle. The automaker is also preparing to begin production of the Jeep Compass/Patriot replacement at its plant in Pernambuco, Brazil, as it seeks to boost Jeep sales in South America.

Currently, the Compass and Patriot are built in Belvidere, Ill. Marchionne did not discuss the future of that plant. The Free Press has previously reported that the Jeep Cherokee, currently made in Toledo, will be moved to Belvidere.

That will give the automaker the ability to boost production capacity of the Jeep Wrangler and build a Jeep pickup in Toledo so it can meet demand for the Wrangler in the U.S. and export a higher volume.

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The new production plan has roots in the company's troublesome transition from the Jeep Liberty in 2012 to the Jeep Cherokee in 2013.

In 2012, when FCA discontinued the Jeep Liberty, it lost almost a year of production volume and profits as it retooled the plant to make the new Jeep Cherokee.

Marchionne vowed that FCA would never repeat the mistake.

"The realignment of the NAFTA footprint was driven by two conditions," Marchionne said Tuesday. "We ran the optimization exercise with a very clear view of not losing one unit of sales for Ram and not losing one unit of sales for Jeep."

Marchionne's plan is also driven by the need for FCA to be a more competitive automaker in North America. FCA's North American profit margin's have lagged far behind the lofty 10% or so that Ford and General Motors have cleared with ease in recent years.

Eventually, Marchionne came to the conclusion that FCA is at a disadvantage because Ford and GM sell a higher volume of SUVs and pickups, and he set out to fix that problem. On Tuesday, Marchionne said the company's financial results prove the plan is already showing results.

FCA's pre-tax profit margin for the first quarter in North America was 7.2%, up from 3.7% for the same period last year.

The automaker's total pre-tax profits topped $1.38 billion in North America, about double the $678 million for the same period a year ago.

Marchionne said the improvement is directly related to the decision to cut production of the Chrysler 200 and Dodge Dart. The competitive landscape for passenger cars has become far more fierce over the past two or three years as consumers have migrated to crossovers and SUVs and automakers have had to resort to bigger incentives to sell cars.

"I think the call that we made to exit those businesses as a producer in the United States, in hindsight, was probably one of the best calls we’ve made," Marchionne said. "Unfortunately, that information was not available to us back in '09 and '10. Had we known this I think we would have refrained from the investment cycle that we went through."

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.

Key components of FCA's new, multi-billion dollar production plan:

Ram 1500 will be moved from Warren Truck Assembly to Sterling Heights Assembly

Production of Chrysler 200 at Sterling Heights Assembly ends as preparations begin for Ram 1500 with production to begin in 2018.

Warren Truck Assembly to produce the Jeep Wagoneer and Grand Wagoneer full-size SUVs

Production of Jeep Patriot and Jeep Compass in Belvidere, Illinois ends.

Toluca Assembly Pant in Mexico begins producing replacement for Compass/Patriot later this year.

Toledo Assembly Complex begins making next-generation Wrangler and *Jeep Wrangler pickup in 2018 and loses Jeep Cherokee

*Belvidere Assembly Plant to build next-generation Jeep Cherokee

Trenton Engine complex begins making new four-cylinder engine in 2017.

NOTE: All of the above plans have been confirmed by FCA CEO Sergio Marchionne or by the company except for those with a *.