DETROIT, May 22 -- The Chrysler Corporation said early today that it had canceled plans to build a $1.5 billion assembly complex in Windsor, Ontario, that would have produced small vehicles and employed 2,500 people in an innovative manufacturing arrangement. þþChrysler, a unit of DaimlerChrysler of Germany, attributed the decision to the deteriorating economy and overcapacity in the North American industry, which has been hit by softer sales this year. Chrysler had spent months trying to negotiate a package of $200 million in incentives from the Canadian government but encountered resistance over the size and form of the aid package.þþThe factory was dubbed the Windsor Project, after the Canadian city just over the border from Detroit, where Chrysler builds minivans and the new Pacifica, a sport utility vehicle based on a car platform. þþChrysler proposed building a complex that would have included an assembly plant plus factories built on the grounds by its suppliers. They would have been responsible for manufacturing functions like assembling the chassis and painting the vehicles. They would have delivered parts to the plant on a just-in-time basis, lowering costs and keeping inventory to a minimum. þþSuch factories are in vogue in other parts of the world, especially in Europe, where DaimlerChrysler has such an arrangement with suppliers at its Smart car plant in France. þþChrysler's plant, which was set to go into production in late 2005, would have employed 1,000 workers, and suppliers were set to hire 1,500 workers. Losing the plant was a blow to the Canadian Auto Workers union, which reached a special agreement with the company that cleared the way for the project. þþIn a statement, Chrysler's chief executive, Dieter Zetsche, said the company decided against building the plant for economic and competitive reasons þþ``The state of the automotive market has created a formidable hurdle, especially for a small, entry-level vehicle such as the one we were considering,'' Mr. Zetsche said. ``Additionally, competitive pricing, ongoing incentives and increasing overcapacity in North America led us to conclude that this is not the time to add new capacity.'' þþNews reports last month said Chrysler had cut back its plans for production at the plant, from about 240,000 vehicles annually to 120,000 vehicles a year. Among the products that were under consideration at the plant was a small pickup truck, code-named the M80, that would have competed with small trucks from General Motors Corp. and the Ford Motor Co. þþThe pickup would have been shared with Hyundai Motor Company of Korea, in which DaimlerChrysler holds a 10% stake. Chrysler also was considering building a small sport utility vehicle at the plant that would have been sold by its Dodge division. þþEarlier this year, Chrysler, Hyundai and the Mitsubishi Motor Corporation. of Japan, in which DaimlerChrysler owns a 37 percent stake, announced plans for a joint-venture factory outside Monroe, Mich., to build a new family of small engines that the companies would share. þþBoth Chrysler and Hyundai have aggressive plans to expand their sales in the United States by the end of the decade. þþMr. Zetsche said Chrysler would continue to pursue the idea behind the project. ``Certainly, we believe there is potential value in this business model and we will continue to look for opportunities to explore it,'' he said. þþChrysler said it would continue to invest money in its Canadian operations, which also include a car factory in Bramalea, Ontario, outside Toronto, which is set to begin building a new series of rear-wheel drive sedans next year. þ
Source: NY Times
