Chrysler, supplier invest $530 mln in Indiana plant

By Kevin Krolicki

DETROIT, June 18 (Reuters) - Chrysler Group said on Monday it would build a transmission plant in Indiana in a $530 million joint venture with German transmission maker Getrag.

It was the latest in a string of such announcements by Chrysler in recent weeks as part of a $3 billion program it announced in February to develop and build more fuel-efficient engine systems for its vehicles.

Under the terms of the deal, privately held Getrag will build the plant in Tipton, Indiana to supply dual clutch transmissions to Chrysler starting in 2009.

Chrysler will provide the work force by "leasing" about 1,050 of its workers represented by the United Auto Workers union to Getrag from its own nearby operations in Kokomo, Indiana, Chrysler spokesman Kevin Frazier said.

The two sides will split the cost of machinery.

Chrysler and Getrag will jointly supply the 120 management staff expected to be employed at the new plant, Frazier said.

Construction of the plant, which will have an annual production capacity of 700,000 transmissions, is scheduled to start later this month, Chrysler

Chrysler, which is being taken private by Cerberus Capital Management in a $7.4 billion deal, has been active in seeking out partners to share the cost and risk of new initiatives.

The automaker is seeking a deal with China's Chery Automobile Co. to produce small cars for export.

It also has an engine manufacturing alliance with Hyundai Motor Co. (005380.KS: Quote, Profile, Research) and Mitsubishi Motors Corp.(7211.T: Quote, Profile, Research)

In April, Chrysler announced an investment of $1.43 billion in two Michigan plants that will produce axles and a new V-6 engine for Chrysler brand vehicles.

Last week, the automaker said it would invest $450 million to retool an engine plant in Kenosha, Wisconsin to build those new V-6 engines, which Chrysler calls its Phoenix project.

The automaker, which lost almost $1.5 billion last year, has said it is aiming to return to profitability by 2008 as part of a turnaround plan that includes cutting about 13,000 factory jobs.

"This investment is a significant step toward realizing our vision to see this company and our union grow this business and transform Chrysler into a stronger company that will be competitive for the long run," UAW Vice President General Holiefield said in a statement.

Holiefield will lead contract talks with Chrysler as part of a round of negotiations between the UAW and the Detroit-based automakers to replace pay and benefit deals that expire in September.

((Reporting by Kevin Krolicki, editing by Ted Kerr; Reuters Messaging: kevin.krolicki@reuters.com@reuters.net; 1-313-967-1902; editing by Deborah Cohen)) Keywords: CHRYSLER PLANT/