By Deepa Seetharaman
DETROIT (Reuters) - Chrysler Group LLC will invest $238 million in two plants in Michigan to boost engine production to meet U.S. demand for smaller, more fuel-efficient engines, the U.S. automaker majority owned by Fiat SpA said on Thursday.
Chrysler is spending $198 million to make by early 2014 its Pentastar V6 engine at the Mack I Engine Plant in Detroit, which now makes a larger engine for the Ram 1500 truck. The automaker is also working on several variants of the 3.6-liter V6 engine, including a smaller 3.2-liter version.
The No. 3 U.S. automaker is also spending $40 million to install a flexible production line -- its first ever -- at its Trenton North plant in Trenton, Michigan, to build both the V-6 engine and the Tigershark four-cylinder engine.
"You can see a downsizing of engines," Sergio Marchionne, the chief executive of both Chrysler and Fiat told reporters at the engine plant in Detroit. "We have more and more efficiency out of the (four-cylinder), you'll see them taking some of the places of the V6s."
The company said it would add up 250 jobs in Mack, subject to market conditions. In March 2013, Chrysler also will add 1,000 new jobs on a third shift at its Warren Truck Assembly Plant, which builds the 2013 Ram 1500 truck in Warren, Michigan.
Marchionne said the added jobs were proof of Chrysler's turnaround since it emerged from a bankruptcy restructuring under management control of Fiat in 2009.
Fiat now owns 58.5 percent of Chrysler. Marchionne said he would like Fiat to buy the rest of Chrysler eventually. Right now the company is trying to buy an additional 3.3 percent stake from a retiree healthcare trust tied to the United Auto Workers union, which owns the rest of the company. The trust and Fiat have sued one another over the price of the 3.3 percent stake that Fiat would like to buy.
Chrysler has bolstered the Italian automaker's finances as Europe undergoes an economic downturn. Marchionne said this could continue for "a while" although he said the European auto sector needed to find a "strategic solution" to the rampant overcapacity problem.
He pointed to "cash-generating" businesses of Fiat's Ferrari and Maserati brands, including its components business. "People are forgetting that we're the biggest automaker in Brazil by far," Marchionne told reporters.
(Reporting By Deepa Seetharaman in Detroit; editing by John Wallace and David Gregorio)