Chrysler to Shift Production of 300 Sedan to Canada (Update3)

By Jeff Bennett

July 19 (Bloomberg) -- Chrysler will spend as much as $1.2 billion to move assembly of a version of its 300 sedan to Ontario from Austria as the automaker works to return to profit.

About $500 million will go to Chrysler's Brampton plant to build the 300 LX model, while other money will be spent on the car's design, engineering and supplier development, spokesman Ed Saenz said today. Magna International Inc. now makes the 300 in Graz, Austria.

The shift to Brampton is part of Chrysler's Feb. 14 plan to cut manufacturing and other costs after a $680 million 2006 loss. DaimlerChrysler AG is selling an 80.1 percent stake in the Auburn Hills, Michigan-based company to Cerberus Capital Management LP.

``With all of models going through the plant we can now add in different versions of vehicles,' Saenz said. ``The move will also help us save money by not having to retool Magna's Graz facility. Manufacturing flexibility is critical.'

Production of the LX model of the 300 is scheduled to begin in 2010 at Brampton, where about 4,000 workers on three shifts now make the 300, Dodge Magnum and Dodge Charger. The Charger and 300 were Chrysler's top-selling cars in the U.S. in the first half. The Brampton factory is scheduled to add the two- door Dodge Challenger coupe next year.

Today's announcement has no impact on Chrysler's 300C production at DaimlerChrysler's plant in Beijing, Saenz said.

Magna's Challenge

Magna Chief Financial Officer Vince Galifi said the Aurora, Ontario-based company had been producing the 300 in Austria since 2005. ``We continue to have discussions with automakers about other potential vehicle assembly contracts,' he said.

Magna made an undisclosed bid for Chrysler earlier in the year. The automaker's sale to Cerberus is scheduled to close this quarter.

Saenz said the investment was announced to workers today in Brampton. The news comes two days after Chrysler said it was scrapping its plans to build a new luxury sedan known as the Imperial because of rising gasoline prices and changing mileage standards. That model was to be built in Brampton.

DaimlerChrysler's U.S. shares rose 13 cents to $92.09 at 4:01 p.m. in New York Stock Exchange composite trading. Magna's U.S. shares gained 1 cent to $95.20.