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AMC, Chrysler Reach Agreement on Kenosha

June 30, 1986

DETROIT (AP) _ American Motors Corp. will assemble full-size, rear-wheel-drive cars for Chrysler Corp. at AMC’s Kenosha, Wis., plant beginning next year, the two automakers said today.

The companies signed a memorandum of understanding under which AMC will provide assembly and related engineering services to produce Chryslers ″M″ car line, which includes the Chrysler Fifth Avenue, Dodge Diplomat and Plymouth Gran Fury.

Joseph E. Cappy, AMC president and chief executive officer, said the company expected to recall about 3,200 hourly and 300 salaried employees at Kenosha and Milwaukee as a result of the tentative agreement.

Cappy said Chrysler needed a plant that could produce up to 150,000 cars annually and would be available for several years.

″Preparation of the Kenosha plant for the additional assembly of Chrysler cars will begin immediately,″ Cappy said. ″If a final agreement is reached, it is expected that production of Chrysler ‘M’ cars will begin there in February of 1987.″

AMC, the nation’s fifth-largest automaker, produces the small Alliance and Encore models of its French partner Renault at the Kenosha plant. Sales of the models, however, have been off sharply, and the plant is operating below capacity.

About 3,900 AMC workers have been laid off from the Kenosha plant, the company has said.

Cappy said today that he hopes the AMC-Chrysler deal will lead to arrangements between AMC and other companies for AMC’s four assembly plants in the U.S. and Canada.

″I’m sure we’re going to attract the attention of some Japanese,″ he said.

Cappy also said he hopes to sell Chrysler on the idea of using AMC’s stamping capacity to make metal parts for the cars, or even use AMC’s eight- cylinder engines in the cars.

The price of the contract was not disclosed. However, Cappy said the formula is a fixed fee plus a variable fee based on the amount of cars produced.

He said basically Chrysler was looking to build the car for three model years beginning in February 1987.

AMC had said it was looking at plant sites with an eye to possibly replacing the aging Kenosha plant, which was built in 1902.

Chrysler, the No. 3 automaker, has been building the ″M″ cars at its Fenton, Mo., plant, but announced recently it will convert the plant to production of its Dodge Caravan and Plymouth Voyager minivans.

″Chrysler will provide proven procedures, equipment and standards that we have used to build our luxury cars,″ said Gerald Greenwald, chairman of Chrysler Motors, the company’s auto-making arm.

″We are confident that the workers in Kenosha are committed to turning out a first-class product,″ he said.

Recalls of laid-off workers would begin as soon as a final agreement is signed, said Michael F. Aberlich, AMC spokesman. ″That could be a matter of days, or it could be weeks,″ he said.

A final agreement depends upon whether AMC and union locals representing workers at Kenosha can reach agreement, mainly on changes to work rules and job classifications, Aberlich said.

The companies said AMC has presented a plan to Wisconsin state officials outlining training funds needed for the project. The federal government also has been approached to share the cost of training recalled employees, the companies said.

Wisconsin Gov. Anthony Earl ″has told us he will convene a special session of the legislature to look at our needs immediately so we can resolve that,″ Aberlich said.

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