Although Chrysler Group LLC’s $843 million investment in Kokomo won’t create jobs, it will be just as significant to retain 2,250 positions and almost as many related jobs, economic officials and experts say.
In a city with prevalent statistics like a 12.6 percent unemployment rate and every 10 automotive jobs leading to seven to nine related ones, Chrysler’s announcement Tuesday will have big effects on more than 4,000 workers, economists say.
Chrysler, pending the city of Kokomo’s approval of a tax abatement on the investment, plans to partner with Germany-based ZF Group and produce a new generation transmission.
Jodi Tinson, a spokeswoman for the company, said the $843 million in new investments will come into Kokomo starting with equipment installations in the first quarter of 2011. The expenditures will continue through 2015 as the automaker pumps money into the undisclosed type of transmission, she said.
The plans should retain about half of Chrysler’s employees in Kokomo.
But what makes the investment more significant is the number of related jobs that will also be saved, said Jerry Conover, the director of the Indiana Business Research Center at Indiana University’s Kelley School of Business.
For every 10 jobs at Chrysler in Kokomo, Conover said, there are nine related ones, such as suppliers or retailers. That means a total of about 4,275 jobs should be retained by Chrysler’s investment.
“It’s not as desirable a goal as adding new jobs, but those jobs could have gone away,” he said. “If the plant went away for some reason and those 2,250 jobs were no longer around, you’d be looking at a crater in the economy of 4,300 jobs.”
Jeb Conrad, the president and CEO of the Greater Kokomo Economic Development Alliance, said the job retention not only protects those workers, but they will likely become more confident in their employment and be willing to spend more.
“I don’t think they’ll run out and do that,” Conrad said, “but they’ll feel more secure in their employment versus two years ago. It didn’t matter what industry sector you were in, people are still worried.”
Michael Hicks, the director of Ball State University’s Center for Business and Economic Research, was more skeptical of the investment. He said spending $843 million without new construction or adding production lines seemed like too large of an amount.
Hicks, who said Kokomo had closer to seven jobs related to every 10 in automotive, noted Illinois-based Progress Rail Services’ plans to invest $50 million in Muncie and create 650 jobs. Chrysler’s plans would put it more on-par with Honda’s $550 million investment in Greensburg that created 2,000 jobs, he said.
“But this is good for Kokomo, absolutely no doubt about it,” he said.
Hicks and Conover both said Chrysler needed to invest in the new transmission in order to keep itself competitive domestically and globally.
“In order to stay in business over the long haul, you have to continue investing in a business,” Conover said. “The only way for an automotive company like Chrysler is to produce vehicles that people want and to do it in a way that you could make a profit.”
Hicks said Chrysler’s position in profits behind Ford and General Motors shows it has a long way left before it is financially sound.
“It remains a terrible time for Chrysler, and they’re still selling a product that is not as profitable or reliable or as low-cost to make as a Toyota or a Honda or a Subaru,” he said. “It is often times a bit more expensive. Until those things align, Chrysler, to a greater extent, but GM as well, face a very uncertain future.”