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Fiat Chrysler to invest $1 billion in Michigan plant, pay bonus after tax cut

Fiat-Chrysler

Jamie Butters and Ryan BeeneBloomberg

Fiat Chrysler Automobiles 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 has 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.”

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 more than 30 percent already this year after almost doubling in 2017. The stock jumped as much as 1.6 percent in early trading Friday.

“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 is re-purposing the current heavy-duty Ram factory in Saltillo, Mexico, 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, Michigan, factory to produce the Jeep Wagoneer and Grand Wagoneer SUVs and that the plant would be able to make the bigger Ram trucks.

“Thank you Chrysler, a very wise decision,” Trump tweeted late Thursday. “The voters in Michigan are very happy they voted for Trump/Pence.”

The roughly $120 million payout to employees will be in addition to profit-sharing checks that United Auto Workers members receive as part of their contracts. Wal-Mart Stores Inc. said earlier Thursday it will boost wages to $11 an hour and also give as much as $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.

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