Auburn Hills, Mich.-based Chrysler Group has come off of life support to become a revitalized enterprise. Resurrected from bankruptcy, but with no powertrain strategy, the Detroit automaker has turned things around – thanks to high-level management ideation and a CEO’s strong commitment.
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A carefully developed plan now in place, the company can boast one of the world’s largest transmission installation operations. Substantial investments bring ambitions to fruition, observes Dan Harvey.
In late February 2013, Chrysler group announced plans to further expand operations and add more jobs in Kokomo, Ind., catapulting its total investment in the strategically located mid-western town to more than $1.6 billion and moving the Chrysler Group into a new era.
By 2014, the billion-dollar plan will have added process improvements, production of the eight- and nine-speed transmissions and nearly 4,000 new jobs at four area facilities, including at least 850 at a new facility in Indiana’s Tipton County.
But the road to making these announcements was anything but smooth.
Chrysler Group LLC was formed in June 2009 to establish a global strategic alliance with Fiat S.p.A. after the Company emerged from bankruptcy. Its product line includes some of the automotive markets most recognizable vehicles: Chrysler 300 and Town & Country, Jeep® Wrangler, Dodge Dart, Ram 1500, Jeep® Grand Cherokee, Fiat 500 and SRT Viper. But as the country fell into a recession, Chrysler followed. Without new investment, its technology and products were appearing a bit tired.
Brian Harlow, Chrysler Group’s vice president and head of NAFTA Powertrain Operations and global head of Powertrain Manufacturing Engineering, narrates the situation the organization found itself in in the latter part of the first decade of the new century. “Coming out of bankruptcy, money was loaned to continue operations and invest wisely,” he recalled. “Decision making became critical, as our line of vehicles had become a bit stale, and our powertrains were even staler.”
From Clinical Flat Line to Industrial New Line
Chrysler Group CEO Sergio Marchionne described what occurred in 2009 as a “near fatal experience.” Indeed, all concerned – management, labor and government – were determined to make the most of what has been described as a “second chance.”
That goal led to a series of long meetings, particularly related to powertrains. CEO Marchionne actively participated. “The first decision involved determining exactly what we were going to make,” continued Harlow, “and we immediately analyzed what was available to us to accelerate our sales.”
That cast the company’s eyes first upon the engine side of the business, and for good reason. “We had already developed the new Pentastar engine,” said Harlow. “While the engine was developed and the facilities in place somewhat but not launched, the supply base wasn’t quite ready. Thus, we spent the next several months defining what needed to be done to get the engine to market as quickly as possible.”
Part of the solution entailed changing direction by accelerating plans for the Trenton South Engine Plant, located in Trenton, Mich. That plant was an integral part of the company’s overall strategy. In 2007, Chrysler announced plans to invest $730 million to build a new plant to produce the Pentastar (a new fuel-efficient V-6 engine), but those plans were slowed substantially as the Company struggled financially. After bankruptcy, work on the Trenton plant accelerated and production launched in early 2010. The 822,000 square-foot facility particularly focused on this engine, which Chrysler has described as the most advanced six-cylinder engine it has ever produced. Performance and fuel efficiency have been substantially improved. (As far as fuel efficiency, the Pentastar delivers an average eight-percent improvement over previous Chrysler Group V-6 engines.)
The new Pentastar was slated to replace seven of Chrysler’s existing V-6 engines, so an additional assembly plant was needed to meet future demand.
“We also had plans for a sister duplicate plant in Saltillo, Mexico, but that wasn’t even scheduled to come on line for a couple of years,” said Harlow. “Those plans were also accelerated.” (In November 2013, the two plants combined have built more than three million Pentastar engines, or nearly one every six minutes since 2011.)
One of the significant challenges the Company faced in 2009 in accelerating its plans was convincing the supply base to buy into supporting production of 900,000 Pentastar engines.
One Step Back But Two Steps Forward
The supply base questioned the Company’s plans because it had limited resources. “We had to get our supply base convinced to ramp up accordingly,” said Harlow.
Adding to the complexity was a problem on the transmission side. “We had a plan, before bankruptcy, for a business arrangement with a supplier company to produce transmissions. That was the sole direction by which we would support all future transmission prodution,” said Harlow. “But it turned out to be a failed plan.”
That’s how the Tipton plant came into being, he explained. “That supplier built the Tipton plant, but never occupied it,” said Harlow. “The plan failed, in part, because most existing plants weren’t prepared from a capacity and quality standpoint to support what we needed.” The company had to go immediately into a “triage” situation, to borrow from emergency medical terms, to increase capacity of the six-speed and to correct quality-related issues.
“Meanwhile, we had yet another thing to consider,” said Harlow. “We wondered how we could move on from this dilemma to advance to the next step on the powertrain side to be competitive. That led to a lot of discussion about how to proceed. We came to the realization that we needed to be a player ourselves. To get others convinced to invest for us was not easy. One of the ways to get the capacity we needed was to invest ourselves.”
All things combined, Chrysler Group moved toward eight- and nine-speed transmission technology and the development of its new plan – make transmission manufacturing a core competency and invest in its existing production facilities in Kokomo.
Five Plants Involved in Producing Next Generation Transmissions
Geographically, Chrysler has several critical facilities well positioned in Indiana, a state that could be considered the “Second Detroit.” According to the United States Bureau of Economic Analysis, Indiana’s automotive industry is the second largest in the nation. Along with Chrysler, companies such as Honda, Toyota, and Subaru consider it a home base.
Brad Clark, Chrysler Group’s head of transmission operations in Kokomo, adds some details about the Company’s facilities and the plan: “Of the four Kokomo plants, three are focused on transmissions and one is a die-cast facility. The Kokomo Transmission plant – the largest and oldest of the plants – has made three transmissions, including the four-speed automatic transmission [front-wheel drive] and the six-speed transmission. It launched the eight-speed rearwheel drive last year. In addition, it does all of our aluminum machining, and it was the site of the launch of the engine block machining line.”
It measures about three million square feet, and it employs 3,300 people, and it’s a busy facility, he said.
He points to another facility. “About five miles south is Indiana Transmission Plant I, which produces our rearwheel drive, six-speed transmission that you’ll find in most of the Ram product line,” he said. “This facility will launch the rotating and assembly portion of the nine-speed front-wheel drive product line. That plant has about 1,700 employees.” Indiana Transmission Plant II, which has about 1,000 employees, is the rearwheel drive, five-speed facility, with its output going into Chrysler Group’s Jeep Wrangler, Dodge Charger and Dodge Challenger.
“Finally, the die-cast facility in Kokomo houses all of our die cast operations for our aluminum line and gear boxes. It also does the majority of the engine block for the Pentastar engine,” said Clark.
As for the Tipton facility, the plant will oversee the nine-speed assembly operation, for expanded volume. “We’re expecting to have more than 800 employees,” said Clark. “It’s a plant that has been vacant for several years, so we’re in the process of revitalizing and preparing it for production. We expect operations to be up and running in the first half of 2014.”
New Transmissions – Benefits
You’ll find the Kokomo-produced eight-speed transmission in the new Jeep Grand Cherokee, Dodge Charger and Chrysler 300. In the Grand Cherokee, this transmission drives the 3.6-liter Pentastar V-6 engine (which is expected to achieve up to 25 miles-per-gallon on the highway and more than a 600-mile driving range) as well as the new EcoDiesel. The 5.7-liter V-8 achieves up to an estimated 22 mpg highway.
As reported, the Dodge Charger and Chrysler 300 were the first domestic sedans to feature an eight-speed automatic transmission. Combined with the 3.6-liter Pentastar V-6 engine, they deliver best-in-class highway fuel economy among full-size, rearwheel-drive competition (up to 31 mpg) and all-wheel-drive models (up to 27 mpg).
“Fuel economy and reduced emissions – that’s what it’s all about,” said Harlow. “The eight- and nine-speed transmissions represent big players when it comes to meeting those requirements, and that’s both current and ongoing. Also, the functionality of the transmissions is optimal. But to make the shifting process absolutely seamless, it has to be made right. So far, all indications are that we’ve succeeded.”
Over the past four years, state and local governments have been very supportive as Chrysler positioned itself for recovery, and began announcing new investments and jobs.
“But when we were going through bankruptcy in 2009, it wasn’t so popular to support Chrysler,” said Harlow.
Harlow recognizes – and certainly appreciates – the courage that it took to provide support at that time. Even knowing what the potential outcome could be, former Indiana Governor Mitch Daniels made the gamble. The subsequent relationship fostered cooperation, including with a new state administration under Governor Mike Pence.
“True, we had to make a serious effort to reach out, but that led to support on the local [county and city] and state levels,” said Clark. “Support has also come from within the regional education system, on the high school and university levels. The public sector has come into play, too. In all of the cities and counties that I have worked in, I haven’t seen this kind of relationship. I’ve never seen such closeness.”
That all leads to the main reason for Chrysler’s recovery: skilled employees.
“Fortunately, we have been able to develop a solid and skilled workforce. There are a lot of technical requirements in the building of powertrains and transmissions, as well as die castings,” said Harlow.
Indeed, Chrysler Group focuses on this critical element.
“We will continue to invest in training our people as required, and our World Class Manufacturing Academy, located in Warren, Mich., will further optimize operations,” said Harlow. “We’ve been creative as far as utilizing assets and developing our workforce, and we will continue to do so. Developing a growing workforce has been a huge advantage. Indeed, there is a significant need for us to keep investing in our workforce. There are a lot of people approaching retirement. Our WCM process helps us maintain and grow our most important resource – the workforce.”
Mistakes have been made and lessons learned.
“One of the things we are doing now that we didn’t do so well in the past relates to the level of technical support, or our engineering workforce,” said Harlow. “We develop the process, with the help and input of the operators, before it’s brought out to the floor. That helps people operate it efficiently. By understanding the value of problem prevention before the process comes in, the level of technical people on the floor goes down because they are no longer trying to figure out how to make something work.”
But success in this new direction for Chrysler Group is not only internal; it’s external.
“We must acknowledge our relationship with UAW. It has supported the Kokomo facilities’ expansion and the overall Company,” said Jodi Tinson, a company spokesperson for Manufacturing and Labor. “We’ve accomplished a lot, but I don’t think we could have done it without their partnership. The collaboration will help us on our path toward sustainable profitability.”
Indeed, UAW Regional Director Ken Lortz has been recently quoted as saying, “In partnership with the UAW, Chrysler Group is helping grow good paying manufacturing jobs and securing the future manufacturing base in this country.”