Hyundai, Mitsubishi Out of Chrysler Engine-Making JV

Hyundai, Mitsubishi Out of Chrysler Engine-Making JV

 Two of the three partners in the Global Engine Manufacturing Alliance are bowing out, leaving  Chrysler Group LLC with a four-cylinder global engine family and lots of engine production capacity at a highly efficient plant in Dundee, Michigan

Hyundai Motor Co. and Mitsubishi Motors Corp. cut their ties with the GEMA venture last month, selling their shares to Chrysler for an undisclosed amount. The Dundee site began producing the jointly developed engines in October 2005. While two plants in Asia also produced the engines for Mitsubishi and Hyundai, the plan was for the two companies to also take engines supplied by the Dundee GEMA plant for vehicles Hyundai and Mitsubishi built in North America.

That never happened -- and despite the Dundee plant being named as North America's most productive powertrain plant by the indisputable Harbour Report, the plant has long run at barely half capacity.

Now it seems inevitable Chrysler's managing owner, Fiat S.p.A., which controls 20 percent of the company, will move in to begin building Fiat-designed engines. The Dundee site is equipped with flexible tooling that would easily accommodate continued production of the current GEMA-designed four-cylinder engines as well as additional new engine architectures.

Fiat promised it would supply its technically advanced small engines to Chrysler as part of its agreement with the U.S. government that gave Fiat its current Chrysler share and allowed it to assume management control of Chrysler. A contingency of Fiat acquiring more of a stake in Chrysler is to build fuel-efficient engines and other powertrain components in the U.S.; doing so can allow Fiat to obtain another 5 percent share.

The Dundee plant's co-developed 1.8-, 2- and 2.4-liter four-cylinder "world" engines are adequate efforts and have all the requisite contemporary technology, but never have been judged as benchmarks. Mitsubishi and Hyundai currently use versions of the family in various models, as does Kia Motors, a division of the Hyundai automaking group. Chrysler uses the engines in three variants of its compact-car platform (Dodge Caliber and Jeep Patriot and Compass), the Dodge Avenger and Chrysler Sebring midsize cars and Dodge Journey crossover.

But Hyundai and Mitsubishi's refusal to use Dundee-sourced engines for U.S.-built models had signaled the alliance's original strategy did not unfold as planned. For Mitsubishi, the company fell on hard times in its home market and the U.S., where sales last year dropped by nearly 25 percent to less than 100,000 units.

Conversely, Hyundai/Kia's market share in the U.S. is climbing, but for reasons never made clear, the company did not elect to use four-cylinder engines sourced from the Dundee GEMA plant, even when a new Hyundai vehicle-assembly plant in Montgomery, Alabama, came on stream in 2005 and with a Kia assembly plant in West Point, Georgia, scheduled to begin production this fall. -- Bill Visnic

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.