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Fiat Chrysler to Invest $4.5B For Michigan Capacity Expansion

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Fiat Chrysler Automobiles N.V. (FCAU - Free Report) will invest $4.5 billion in five of its existing facilities in Michigan and work towards building a new assembly plant within the city limits of Detroit, MI. The improved capacity will aid Fiat Chrysler to meet the rising demand for Jeep and Ram brands. Further, the facilities will also manufacture two new Jeep-branded products, along with electrified models. The planned capacity expansion will create around 6,500 jobs in Michigan.

The automaker plans to invest $1.6 billion to convert two plants, which comprises of Mack Avenue Engine Complex to produce the next generation Jeep Grand Cherokee and all-new 3-row Jeep SUV and plug-in hybrid models. It will start building the new Detroit-based facility by the end of second-quarter. The first 3-row vehicles are likely to be available by the end of 2020 while the next generation Grand Cherokee by the first-half of 2021.

Further, an investment of $900 million will be made to modernize the Jefferson North assembly plant and manufacture Dodge Durango and new Jeep Grand Cherokee. The other facilities namely, Dundee Engine plant, Warren Truck, Warren Stamping and Sterling Stamping will receive investment of $119 million, $1.5 billion, $245 million and $160 million, respectively.

A shift towards spacious SUVs and trucks have impelled Fiat Chrysler to stop manufacturing compact cars. The automaker retooled its factories in Illinois, Ohio and Michigan to utilize the capacity for producing Jeep and Ram brand vehicles. The investment decision of $4.5 billion is in line with the company’s strategy to realign U.S. manufacturing operations and improve profitability from the robust demand for Jeep and Ram brand vehicles.

Zacks Rank & Stocks to Consider

Fiat Chrysler currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are General Motors Company (GM - Free Report) , Valeo S.A. (VLEEY - Free Report) and Ferrari N.V. (RACE - Free Report) . General Motors and Valeo currently carry a Zacks Rank #2 (Buy) while Ferrari sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

General Motors has an expected long-term growth rate of 8.5%. The Zacks Consensus Estimate for the company’s earnings for 2019 being revised 3.7% upward over the past 30 days.

Valeo has an expected long-term growth rate of 0.5%. The Zacks Consensus Estimate for the company’s earnings for 2019 being revised 0.6% upward over the past 30 days.

Ferrari has an expected long-term growth rate of 18.5%. The Zacks Consensus Estimate for the company’s earnings for 2019 being revised 10.1% upward over the past 30 days.

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