Chrysler set for two new Michigan plants

DETROIT (Reuters) - Chrysler Group is set to unveil plans to build two new factories in Michigan as part of a planned $3-billion investment in more fuel efficient vehicles, according to state and company officials.

The planned investments in powertrain factories includes a new engine plant in Trenton, Michigan that will produce an upcoming family of V-6 engines that Chrysler has code-named its Phoenix project, state officials said.

The Michigan Economic Development Corporation, a state agency, announced on Wednesday that it had approved an eight-year tax credit of $11.2 million for the new Trenton engine plant.

Trenton Mayor Gerry Brown said he would attend an event scheduled by the company for Wednesday and expected to hear positive news for his city, which now counts Chrysler as its largest taxpayer.

Chrysler is also building a new axle factory in Marysville, Michigan, according to a company official, who declined to be named.

Chrysler, a unit of Germany's DaimlerChrysler AG , has said Michigan Gov. Jennifer Granholm and UAW President Ron Gettelfinger will be in attendance at the event to discuss what the company called a "significant" investment.

But Chrysler declined to provide further details ahead of the planned announcement.

The total amount of the combined investment in the two powertrain plants was not immediately available.

It was also not clear what the net effect of the plans would have on unionized Chrysler jobs in Michigan, home to the struggling U.S. auto industry.

Chrysler, which is cutting jobs in a bid to return to profitability, currently operates an axle plant in Detroit and a V-6 engine plant in Trenton that together employ over 3,200 workers represented by the United Auto Workers union.

But Chrysler spokesman Mike Aberlich said the automaker, which has been put up for sale by Daimler, was pressing ahead with plans to lessen its reliance on gas-guzzling trucks by building new production facilities.

"This is part of a $3 billion investment in powertrains," Aberlich said. "We want to move to more fuel-efficient vehicles and it all starts with powertrain."

Chrysler lost nearly $1.5 billion in 2006 as inventories mounted and consumers shifted away from the light trucks and sport utility vehicles that accounted for nearly 70 percent of its total sales.

Now the Auburn Hills, Michigan-based automaker is moving ahead with plans to cut 13,000 jobs and return to profitability by 2008, even as parent company Daimler meets with potential buyers for the unit.

Those include private equity firms Cerberus Capital Management, Blackstone Group and Canadian auto parts maker Magna.

Michigan state and local officials on Tuesday said they had approved an incentive package of about $78 million intended to keep an estimated 485 Chrysler jobs in the state.

Michigan officials estimated that the combined package would keep a total of 1,324 Chrysler-related jobs in the economically troubled state.

Chrysler currently operates an engine plant in Trenton that produces V-6 engines for its popular minivans as well as the Jeep Wrangler, Chrysler Pacifica and Dodge Nitro.

Brown, the Trenton mayor, said the city had offered Chrysler tax credits under a law that allowed it to offer sweeping tax abatements as an economically distressed community.

"This is us keeping our heads above water," Brown said. "We said we were going to fight to keep Chrysler, and it looks like we have done enough."

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