While VW Takes a Beating, Fiat Chrysler and Subaru Roll Out Big Plans
By Burt Carey
Less than two months after storming to the top of worldwide auto manufacturer sales in 2015, Volkswagen is reeling to absorb a recall of as many as 11 million vehicles to de-program software used on diesel models designed to fool emissions testers.
Such bad news quite easily drowned out the industry’s good news for the week: Fiat Chrysler has reached tentative agreement with the
United Auto Workers union that amazingly pushes more manufacturing into Mexico, and Subaru intends to add 1,200 jobs and pour an additional $140 million into its plant in Lafayette, Ind.
The VW scandal first broke in the United States last Friday when the Environmental Protection Agency and California Air Resources Board accused the company of falsifying emissions tests on diesel models by installing software that could sense when the car was being tested and then activated equipment that reduced emissions. The software turned that equipment off during routine driving, increasing emissions as much as 40 times above legal limits.
On Tuesday, the company said as many as 11 million cars, from model years 2009 through 2015, were equipped with the software, and most of those are in VW’s core market, Europe.
VW CEO Martin Winterkorn, 68, said the company is setting aside $7.3 billion to pay for improvements and bring recalled cars into compliance. Meanwhile, the U.S. Justice Department has begun a formal investigation, and attorneys general in several states are looking into separate actions to take against VW.
Fiat Chrysler Strikes A Deal
At first glance, it almost seems a miracle that Fiat Chrysler convinced UAW workers to agree to a contract that guarantees more vehicles will be manufactured in Mexico. But after a sobering look at their options, union bosses settled for pay increases, profit sharing and a $5.3 billion investment toward building the company’s most expensive models.
At the other end of that two-edged sword was a trade-off with Fiat Chrysler that allows the company to manufacture smaller, less expensive models south of the border. Some 40,000 domestic union workers will build more profitable SUVs and pickups, which makes Fiat Chrysler’s UAW agreement similar to a deal that moved Ford F-series manufacturing from Mexico to Ohio earlier this year. Moving south of the border will be the production lines for the Dodge Dart, Chrysler 200 and a Jeep that will replace the Compass and Patriot.
It’s a trade-off for UAW workers, who are betting the U.S. market for SUVs, crossovers and pickups will remain strong as demand for low-end vehicles softens. The deal pays each union worker a $3,000 signing bonus, guaranteed raises, profit sharing and a health care co-op designed to keep cost increases in check.
Mexico now has 18 auto manufacturing plants, and produces one out of every five cars sold in the U.S., which is double the number it built just a decade ago.
Subaru Spends Another $140M in Indiana
A little over two years ago Subaru announced plans to invest $400 million in its Lafayette, Ind., plant to keep pace with U.S. sales. This week Subaru CEO Yasuyuki Yoshinaga committed another $140 million and said the company will add 1,200 more jobs by 2017.
The Lafayette plant, Subaru’s lone assembly facility outside of Japan, is used to build the Outback SUV and Legacy sedan models. It produces some 300,000 vehicles per year and employs 3,800 workers. The new investment and additional workforce will allow Subaru to increase production by 100,000 vehicles per year.
Yoshinaga said a new seven-seat SUV will begin production at the Lafayette plant after 2017 and will be sold exclusively within North America. The Lafayette plant also manufactures the Toyota Camry. That line will be discontinued after the fall of 2016 and moved to Georgetown, Ky., freeing up capacity for another 100,000 vehicles. Subaru plans to move manufacture of its Impreza to Lafayette by the end of 2016.
Subaru has experienced 45 consecutive months of increasing sales in the U.S., including 52,697 vehicles last month, up 4.9 percent from August 2014. Sales for 2015 are up 13 percent over last year.